IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Risk aversion as effort incentive: A correction and prima facie test of the moral hazard theory of share tenancy

  • Mark DeWeaver

    ()

    (Ithaca Advisors, LLC)

  • James Roumasset

    ()

    (University of Hawaii at Manoa)

We show that Stiglitz's (1974) principal-agency theory of share tenancy does not imply, as alleged, that the optimal tenant share is less than one for risk-averse tenants nor that the share decreases monotonically with tenant risk aversion. Tenants may self insure by working harder increasingly so for higher levels of risk aversion with the result that the more risk averse work for higher shares. When the model is parameterized based on previous studies of Philippine agriculture, it predicts a U-shaped relationship between optimal tenant''s share and risk aversion. Landlords choose rent contracts for both high and low levels of risk aversion and shares from 80-99% for intermediate levels. In contrast, actual shares in the study area ranged from 50-60%, with most farmers contracted on a 50:50 basis. We conclude that rent contracts must have additional disadvantages and/or share tenancy additional benefits that are not accounted for in the static principal-agency theory.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.accessecon.com/pubs/EB/2002/Volume15/EB-01O10001A.pdf
Download Restriction: no

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 15 (2002)
Issue (Month): 4 ()
Pages: 1-16

as
in new window

Handle: RePEc:ebl:ecbull:eb-01o10001
Contact details of provider:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Reid, Joseph D., 1973. "Sharecropping As An Understandable Market Response: The Post-Bellum South," The Journal of Economic History, Cambridge University Press, vol. 33(01), pages 106-130, March.
  2. Joseph E. Stiglitz, 1973. "Incentives and Risk-Sharing in Sharecropping," Cowles Foundation Discussion Papers 353, Cowles Foundation for Research in Economics, Yale University.
  3. David E. M. Sappington, 1991. "Incentives in Principal-Agent Relationships," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 45-66, Spring.
  4. Roumasset, James & Uy, Marilou, 1980. "Piece rates, time rates, and teams : Explaining patterns in the employment relation," Journal of Economic Behavior & Organization, Elsevier, vol. 1(4), pages 343-360, December.
  5. Ross, Stephen A, 1973. "The Economic Theory of Agency: The Principal's Problem," American Economic Review, American Economic Association, vol. 63(2), pages 134-39, May.
  6. 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.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-01o10001. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.