IDEAS home Printed from https://ideas.repec.org/p/hai/wpaper/200104.html
   My bibliography  Save this paper

A Correction and Prima Facie Test of the Canonical Theory of Share Tenancy

Author

Listed:
  • James Roumasset

    (Department of Economics, University of Hawaii at Manoa)

  • Mark DeWeaver

    (Ithaca Advisors, LLC)

Abstract

We show that Stiglitz’s (1974) classic principal-agency theory of share tenancy does not imply, as commonly supposed, that the incidence of share tenancy increases with the tenant’s degree of risk aversion nor that share contracts are superior to fixed-lease contracts for risk averse farmers. When the model is parameterized based on previous studies of Philippine agriculture, it predicts that fixed-lease contracts will be chosen when the farmers have slight or severe risk aversion and share contracts will be chosen for moderately risk averse farmers, albeit with tenant shares of 80% or higher. In contrast, the highest observed sharing rates in the study area were in the neighborhood of 2/3, with most farmers contracted on 50:50 sharing arrangements. We conclude that the riskaversion vs. moral hazard theory is incomplete. Rent contracts must have additional disadvantages and/or share tenancy additional benefits that are not accounted for by static principal-agency theory.

Suggested Citation

  • James Roumasset & Mark DeWeaver, 2001. "A Correction and Prima Facie Test of the Canonical Theory of Share Tenancy," Working Papers 200104, University of Hawaii at Manoa, Department of Economics.
    • Handle: RePEc:hai:wpaper:200104
    Note: This paper was presented to The Society for the Advancement of Behavioral Economics Biennial Conference "Applied Behavioral Economics: Can It Improve Decisions and Policies? Is It Already Implicit in Successful Decision Making?"
    as

    Download full text from publisher

    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_01-4.pdf
    File Function: First version, 2001
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hai:wpaper:200104. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Web Technician (email available below). General contact details of provider: https://edirc.repec.org/data/deuhius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.