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Sharecropping, interlinkage, and price variation

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  • Debapriya Sen

    ()
    (Dept. of Economics, SUNY at Stony Brook)

Abstract

This paper proposes a theory of sharecropping and interlinkage on the basis of seasonal variation of price and imperfectly competitive nature of rural product markets. First, a benchmark model is considered to show the optimality of sharecropping in the presence of price variation. This model is extended by allowing interlinked contracts to show that there are multiple equilibria and both forms of contracts—fixed rental and sharecropping—can be sustained in equilibrium. Finally, incorporating the possibility of competition in the product market, an equilibrium refinement is proposed and it is shown that the unique equilibrium that is robust to this refinement results in a contract that involves sharecropping as well as interlinkage. This theory also sheds light on several related issues like observed uniformity of share contracts, technological stagnation and the notion of power in a rural context.

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File URL: http://www.sunysb.edu/economics/research/papers/2005/times.pdf
File Function: First version, 2005
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Bibliographic Info

Paper provided by Stony Brook University, Department of Economics in its series Department of Economics Working Papers with number 05-10.

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Date of creation: Jun 2005
Date of revision:
Handle: RePEc:nys:sunysb:05-10

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Postal: Stony Brook, NY 11794-4384
Phone: (631)632-7540
Fax: (631)632-7516
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Web page: http://www.stonybrook.edu/economics
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Related research

Keywords: Sharecropping; interlinkage; price variation; rural product market; the "-agent;

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References

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  1. Basu, Kaushik & Bell, Clive & Bose, Pinaki, 2000. "Interlinkage, limited liability and strategic interaction," Journal of Economic Behavior & Organization, Elsevier, vol. 42(4), pages 445-462, August.
  2. Shaban, Radwan Ali, 1987. "Testing between Competing Models of Sharecropping," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 893-920, October.
  3. Allen, Douglas W & Lueck, Dean, 1995. "Risk Preferences and the Economics of Contracts," American Economic Review, American Economic Association, vol. 85(2), pages 447-51, May.
  4. Basu, Kaushik, 1983. "The Emergence of Isolation and Interlinkage in Rural Markets," Oxford Economic Papers, Oxford University Press, vol. 35(2), pages 262-80, July.
  5. Rao, C H Hanumantha, 1971. "Uncertainty, Entrepreneurship, and Sharecropping in India," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 578-95, May-June.
  6. Braverman, Avishay & Stiglitz, Joseph E, 1982. "Sharecropping and the Interlinking of Agrarian Markets," American Economic Review, American Economic Association, vol. 72(4), pages 695-715, September.
  7. Jaideep Roy & Konstantinos Serfes, 2000. "Intertemporal Discounting and Tenurial Contracts," Department of Economics Working Papers 00-01, Stony Brook University, Department of Economics.
  8. Shetty, Sudhir, 1988. "Limited liability, wealth differences and tenancy contracts in agrarian economies," Journal of Development Economics, Elsevier, vol. 29(1), pages 1-22, July.
  9. Eswaran, Mukesh & Kotwal, Ashok, 1985. "A Theory of Contractual Structure in Agriculture," American Economic Review, American Economic Association, vol. 75(3), pages 352-67, June.
  10. Bardhan, P K & Srinivasan, T N, 1971. "Cropsharing Tenancy in Agriculture: A Theoretical and Empirical Analysis," American Economic Review, American Economic Association, vol. 61(1), pages 48-64, March.
  11. D. Gale Johnson, 1950. "Resource Allocation under Share Contracts," Journal of Political Economy, University of Chicago Press, vol. 58, pages 111.
  12. Gangopadhyay, Shubhashis & Sengupta, Kunal, 1987. "Small Farmers, Moneylenders and Trading Activity," Oxford Economic Papers, Oxford University Press, vol. 39(2), pages 333-42, June.
  13. Basu, Kaushik, 1986. "One Kind of Power," Oxford Economic Papers, Oxford University Press, vol. 38(2), pages 259-82, July.
  14. Ghatak, Maitreesh & Pandey, Priyanka, 2000. "Contract choice in agriculture with joint moral hazard in effort and risk," Journal of Development Economics, Elsevier, vol. 63(2), pages 303-326, December.
  15. Reid, Joseph D, Jr, 1976. " Sharecropping and Agricultural Uncertainty," Economic Development and Cultural Change, University of Chicago Press, vol. 24(3), pages 549-76, April.
  16. Gangopadhyay, Shubhashis & Sengupta, Kunal, 1986. "Interlinkages in Rural Markets," Oxford Economic Papers, Oxford University Press, vol. 38(1), pages 112-21, March.
  17. Sengupta, Kunal, 1997. "Limited liability, moral hazard and share tenancy," Journal of Development Economics, Elsevier, vol. 52(2), pages 393-407, April.
  18. Stiglitz, Joseph E, 1974. "Incentives and Risk Sharing in Sharecropping," Review of Economic Studies, Wiley Blackwell, vol. 41(2), pages 219-55, April.
  19. Mitra, Pradeep K., 1983. "A theory of interlinked rural transactions," Journal of Public Economics, Elsevier, vol. 20(2), pages 167-191, March.
  20. Sarkar, Abhirup, 1993. "On the formation of agricultural prices," Journal of Development Economics, Elsevier, vol. 41(1), pages 1-17, June.
  21. Basu, Kaushik, 1992. "Limited liability and the existence of share tenancy," Journal of Development Economics, Elsevier, vol. 38(1), pages 203-220, January.
  22. Basu, Kaushik, 1989. "Technological Stagnation, Tenurial Laws, and Adverse Selection," American Economic Review, American Economic Association, vol. 79(1), pages 251-55, March.
  23. Ray, Tridip & Singh, Nirvikar, 2001. "Limited liability, contractual choice, and the tenancy ladder," Journal of Development Economics, Elsevier, vol. 66(1), pages 289-303, October.
  24. Naqvi, Nadeem & Wemhoner, Frederick, 1995. "Power, coercion, and the games landlords play," Journal of Development Economics, Elsevier, vol. 47(2), pages 191-205, August.
  25. Bhaduri, Amit, 1981. "Class Relations and the Pattern of Accumulation in an Agrarian Economy," Cambridge Journal of Economics, Oxford University Press, vol. 5(1), pages 33-46, March.
  26. Banerji, Sanjay, 1995. "Interlinkage, investment and adverse selection," Journal of Economic Behavior & Organization, Elsevier, vol. 28(1), pages 11-21, September.
  27. Newbery, David M G, 1977. "Risk Sharing, Sharecropping and Uncertain Labour Markets," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 585-94, October.
  28. William Hallagan, 1978. "Self-Selection by Contractual Choice and the Theory of Sharecropping," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 344-354, Autumn.
  29. Muthoo, Abhinay, 1998. "Renegotiation-proof tenurial contracts as screening mechanisms," Journal of Development Economics, Elsevier, vol. 56(1), pages 1-26, June.
  30. Ray, Tridip, 1999. "Share tenancy as strategic delegation," Journal of Development Economics, Elsevier, vol. 58(1), pages 45-60, February.
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