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The (Im)Possibility of Reverse Share Tenancy

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  • Bellemare, Marc F.

Abstract

Under the assumption that the landlord is risk-neutral and the tenant is risk-averse, sharecropping is second-best in that it trades off risk sharing and incentives. Many, however, have reported instances of reverse share tenancy, or sharecropping in which the landlord is considerably poorer than the tenant. This note shows that reverse share tenancy is impossible under the canonical Stiglitzian model of sharecropping but becomes possible if and only if (i) both the landlord and the tenant can be assumed risk-averse; or (ii) there exist significant transactions costs making sharecropping more desirable than either a wage or fixed rent contract.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 23681.

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Date of creation: 04 Dec 2009
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Handle: RePEc:pra:mprapa:23681

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Keywords: Sharecropping; Reverse Share Tenancy; Transactions Cost;

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  1. 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.
  2. Patrick Bolton & Mathias Dewatripont, 2005. "Contract Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262025760.
  3. 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.
  4. Rogerson, William P, 1985. "The First-Order Approach to Principal-Agent Problems," Econometrica, Econometric Society, vol. 53(6), pages 1357-67, November.
  5. Travis J. Lybbert & David R. Just, 2007. "Is Risk Aversion Really Correlated with Wealth? How Estimated Probabilities Introduce Spurious Correlation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(4), pages 964-979.
  6. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-28, March.
  7. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
  8. Bellemare, Marc F., 2010. "Insecure Land Rights and Share Tenancy in Madagascar," MPRA Paper 23640, University Library of Munich, Germany.
  9. James A. Roumasset, 2002. "The Microeconomics of Agricultural Development in the Philippines," Working Papers 200210, University of Hawaii at Manoa, Department of Economics.
  10. Marc F. Bellemare & Zachary S. Brown, 2010. "On the (Mis)Use of Wealth as a Proxy for Risk Aversion," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(1), pages 273-282.
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