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Moral Hazard and Marshallian Inefficiency:Evidence from Tunisia

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  • Jean-Louis ARCAND

    ()
    (Institut des Hautes Etudes Internationales et du Développement)

  • AI
  • ETHIER

Abstract

We formalize the link between optimal cost-sharing contracts and the production technology in the presence of moral hazard by appealing to several well-known results from duality theory. Building on intuitions from the interlinkage literature, we show that optimal contractual structure is determined by the (i) substitution possibilities that exist between di¤erent observable factor inputs, as well as (ii) between these inputs and unobservable e¤ort. We endogenize contractual choice using landlord characteristics as instruments, exploiting the fact that, in our dataset, landlords interact with several tenants and vice versa. The approach is applied to an unbalanced plot-level panel of cost sharing contracts in a Tunisian village, using a translog representation of the restricted profit function. Contractual terms are found to be a significant determinant of input use and therefore lead to Marshallian inefficiency, while the optimality of the underlying contractual structure is rejected.

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Bibliographic Info

Paper provided by CERDI in its series Working Papers with number 200534.

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Length: 40
Date of creation: 2005
Date of revision:
Handle: RePEc:cdi:wpaper:835

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Keywords: Keywords: moral hazard; profit functions; sharecropping; Marshallian inefficiency;

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References

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Citations

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Cited by:
  1. Claudio ARAUJO & Catherine ARAUJO BONJEAN & Jean-Louis ARCAND, 1999. "Capital humain, productivité agricole, et travail féminin : variables latentes et séparabilité dans les modèles de ménage," Working Papers 199912, CERDI.
  2. Hagos, Hosaena Gebru & Holden, Stein T., 2013. "Reverse-share-tenancy and Marshallian Inefficiency: Landowners’ bargaining power and sharecroppers’ productivity," IFPRI discussion papers 1270, International Food Policy Research Institute (IFPRI).
  3. John Pender & Marcel Fafchamps, 2004. "Land Lease Markets and Agricultural Efficiency: Theory and Evidence from Ethiopia," Development and Comp Systems 0409021, EconWPA.
  4. Ananish Chaudhuri, 1997. "A Dynamic Model of Contractual Choice in Tenancy," Departmental Working Papers 199711, Rutgers University, Department of Economics.
  5. Bellemare, Marc F., 2010. "Insecure Land Rights and Share Tenancy in Madagascar," MPRA Paper 23640, University Library of Munich, Germany.
  6. Jacoby, Hanan G. & Mansuri, Ghazala, 2009. "Incentives, supervision, and sharecropper productivity," Journal of Development Economics, Elsevier, vol. 88(2), pages 232-241, March.
  7. Ghebru, Hosaena H. & Holden, Stein T., 2012. "Reverse-Share-Tenancy and Marshallian Inefficiency: Bargaining Power of Landowners and the Sharecropper’s Productivity," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126883, International Association of Agricultural Economists.
  8. Deininger, Klaus & Ali, Daniel Ayalew & Alemu, Tekie, 2011. "Productivity effects of land rental markets in Ethiopia : Evidence from a matched tenant-landlord sample," Policy Research Working Paper Series 5727, The World Bank.
  9. Pierre Dubois, 1999. "Moral Hazard, Land Fertility and Sharecropping in a Rural Area of the Philippines," Working Papers 99-30, Centre de Recherche en Economie et Statistique.
  10. Jean-Louis ARCAND & Mbolatiana DE MONTALEMBERT RAMBONILAZA, 1999. "Is Adverse Selection Relevant? Spence-Mirlees Meets the Tunisian Peasant," Working Papers 199923, CERDI.
  11. Jean-Louis ARCAND & CONNING & ETHIER, 1999. "Class position and Economic Behavior in a Tunisian Village: Selective Separability in a Multi-Factor Household Model," Working Papers 199911, CERDI.
  12. Benin, Samuel & Place, Frank & Nkonya, Ephraim M. & Pender, John L., 2006. "Land Markets and Agricultural Land Use Efficiency and Sustainability: Evidence from East Africa," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25645, International Association of Agricultural Economists.
  13. Ananish Chaudhuri & Pushkar Maitra, 1997. "Determinants of Land Tenure Contracts; Theory and Evidence from Rural India," Departmental Working Papers 199710, Rutgers University, Department of Economics.

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