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

A theory of sharecropping: The role of price behavior and imperfect competition

  • Sen, Debapriya

This paper proposes a theory of sharecropping on the basis of price behavior in agriculture and imperfectly competitive nature of rural product markets. First we show the superiority of sharecropping over fixed rental contracts in a benchmark landlord–tenant model with seasonal variation of price, where the tenant receives a low price for his output while the landlord can sell his output at a higher price. Then we consider more general interlinked contracts to show that there are multiple optimal contracts. Finally we incorporate imperfect competition in the product market by assuming that a third agent (called the ɛ-agent) may emerge to compete with the landlord as a buyer of the tenant's output. It is shown that (i) the presence of this competing agent generates a Pareto-improving subset of share contracts out of the multiple contracts and (ii) the unique contract that is robust to the emergence of the ɛ-agent results in sharecropping.

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.sciencedirect.com/science/article/pii/S0167268111000928
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 80 (2011)
Issue (Month): 1 ()
Pages: 181-199

as
in new window

Handle: RePEc:eee:jeborg:v:80:y:2011:i:1:p:181-199
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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. Muthoo, Abhinay, 1998. "Renegotiation-proof tenurial contracts as screening mechanisms," Journal of Development Economics, Elsevier, vol. 56(1), pages 1-26, June.
  2. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-91, May.
  3. Udry, Christopher, 1990. "Credit Markets in Northern Nigeria: Credit as Insurance in a Rural Economy," World Bank Economic Review, World Bank Group, vol. 4(3), pages 251-69, September.
  4. Rosenzweig, Mark R & Wolpin, Kenneth I, 1993. "Credit Market Constraints, Consumption Smoothing, and the Accumulation of Durable Production Assets in Low-Income Countries: Investment in Bullocks in India," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 223-44, April.
  5. Jaideep Roy & Konstantinos Serfes, 2000. "Intertemporal Discounting and Tenurial Contracts," Department of Economics Working Papers 00-01, Stony Brook University, Department of Economics.
  6. Laffont, Jean-Jacques & Matoussi, Mohamed Salah, 1995. "Moral Hazard, Financial Constraints and Sharecropping in El Oulja," Review of Economic Studies, Wiley Blackwell, vol. 62(3), pages 381-99, July.
  7. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
  8. Rosenzweig, Mark R & Binswanger, Hans P, 1993. "Wealth, Weather Risk and the Composition and Profitability of Agricultural Investments," Economic Journal, Royal Economic Society, vol. 103(416), pages 56-78, January.
  9. Hayami, Y. & Kikuchi, M. & Marciano, E. B., 1999. "Middlemen and peasants in rice marketing in the Philippines," Agricultural Economics, Blackwell, vol. 20(2), pages 79-93, March.
  10. S. Narayan, 2009. "India," Chapters, in: The Political Economy of Trade Reform in Emerging Markets, chapter 7 Edward Elgar.
  11. Daniel A. Ackerberg & Maristella Botticini, 1999. "Endogenous Matching and the Empirical Determinants of Contract Form," Boston University - Institute for Economic Development 92, Boston University, Institute for Economic Development.
  12. Bliss, C. J. & Stern, N. H., 1982. "Palanpur: The Economy of an Indian Village," OUP Catalogue, Oxford University Press, number 9780198284192, March.
  13. Martin Ravallion & Shubham Chaudhuri, 1997. "Risk and Insurance in Village India: Comment," Econometrica, Econometric Society, vol. 65(1), pages 171-184, January.
  14. 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.
  15. Allen, Douglas & Lueck, Dean, 1992. "Contract Choice in Modern Agriculture: Cash Rent versus Cropshare," Journal of Law and Economics, University of Chicago Press, vol. 35(2), pages 397-426, October.
  16. Sengupta, Kunal, 1997. "Limited liability, moral hazard and share tenancy," Journal of Development Economics, Elsevier, vol. 52(2), pages 393-407, April.
  17. 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.
  18. 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.
  19. Bhaduri, Amit, 1973. "A Study in Agricultural Backwardness under Semi-Feudalism," Economic Journal, Royal Economic Society, vol. 83(329), pages 120-37, March.
  20. Joseph E. Stiglitz, 1973. "Incentives and Risk-Sharing in Sharecropping," Cowles Foundation Discussion Papers 353, Cowles Foundation for Research in Economics, Yale University.
  21. Gangopadhyay, Shubhashis & Sengupta, Kunal, 1986. "Interlinkages in Rural Markets," Oxford Economic Papers, Oxford University Press, vol. 38(1), pages 112-21, March.
  22. 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.
  23. Banerji, Sanjay, 1995. "Interlinkage, investment and adverse selection," Journal of Economic Behavior & Organization, Elsevier, vol. 28(1), pages 11-21, September.
  24. Mitra, Pradeep K., 1983. "A theory of interlinked rural transactions," Journal of Public Economics, Elsevier, vol. 20(2), pages 167-191, March.
  25. Seema Jayachandran, 2006. "Selling Labor Low: Wage Responses to Productivity Shocks in Developing Countries," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 538-575, June.
  26. 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.
  27. Kaushik Basu, 2003. "Analytical Development Economics: The Less Developed Economy Revisited," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262523442, June.
  28. 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.
  29. 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.
  30. Bardhan, Pranab, 2003. "Poverty, Agrarian Structure, and Political Economy in India: Selected Essays," OUP Catalogue, Oxford University Press, number 9780195661170, March.
  31. 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.
  32. 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.
  33. Forster, Robert, 1957. "The Noble as Landlord in the Region of Toulouse at the End of the Old Regime," The Journal of Economic History, Cambridge University Press, vol. 17(02), pages 224-244, June.
  34. 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.
  35. Naresh Sharma & Jean Dreze, 1996. "Sharecropping in a North Indian Village," Journal of Development Studies, Taylor & Francis Journals, vol. 33(1), pages 1-39.
  36. 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.
  37. Kaivan Munshi & Mark Rosenzweig, 2009. "Why is Mobility in India so Low? Social Insurance, Inequality, and Growth," NBER Working Papers 14850, National Bureau of Economic Research, Inc.
  38. D. Gale Johnson, 1950. "Resource Allocation under Share Contracts," Journal of Political Economy, University of Chicago Press, vol. 58, pages 111.
  39. 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.
  40. 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.
  41. Bardhan, Pranab & Udry, Christopher, 1999. "Development Microeconomics," OUP Catalogue, Oxford University Press, number 9780198773719, March.
  42. Gangopadhyay, Shubhashis & Sengupta, Kunal, 1987. "Small Farmers, Moneylenders and Trading Activity," Oxford Economic Papers, Oxford University Press, vol. 39(2), pages 333-42, June.
  43. Basu, Kaushik, 1992. "Limited liability and the existence of share tenancy," Journal of Development Economics, Elsevier, vol. 38(1), pages 203-220, January.
  44. Ray, Tridip, 1999. "Share tenancy as strategic delegation," Journal of Development Economics, Elsevier, vol. 58(1), pages 45-60, February.
  45. Habib, Irfan, 1969. "Potentialities of Capitalistic Development in the Economy of Mughal India," The Journal of Economic History, Cambridge University Press, vol. 29(01), pages 32-78, March.
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:eee:jeborg:v:80:y:2011:i:1:p:181-199. 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: (Zhang, Lei)

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.