Share Contracts and Unobserved Ability
AbstractWe present a model with a monopolistic landlord and tenants with unobservable ability. In this setting, the landlord should use a wage contract to extract the full surplus due to ability since a share or fixed rent contract leaves some of the surplus in the hands of the tenants. We combine this issue with a standard moral hazard problem on the tenants' side, which argues for a fixed rent contract. A share contract is an optimal compromise between these two forces.
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Bibliographic InfoPaper provided by Schwartz Center for Economic Policy Analysis (SCEPA), The New School in its series SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. with number 2001-03.
Length: 35 pages
Date of creation: Nov 2001
Date of revision:
sharecropping; tenancy contracts; agricultural contracts; pooling equilibrium;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
- Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-09-21 (All new papers)
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- Basu, Kaushik, 1992. "Limited liability and the existence of share tenancy," Journal of Development Economics, Elsevier, Elsevier, vol. 38(1), pages 203-220, January.
- Eswaran, Mukesh & Kotwal, Ashok, 1985. "A Theory of Contractual Structure in Agriculture," American Economic Review, American Economic Association, American Economic Association, vol. 75(3), pages 352-67, June.
- Franklin Allen, 1982. "On Share Contracts and Screening," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 13(2), pages 541-547, Autumn.
- Reid, Joseph D, Jr, 1976. " Sharecropping and Agricultural Uncertainty," Economic Development and Cultural Change, University of Chicago Press, University of Chicago Press, vol. 24(3), pages 549-76, April.
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