When contracts interact: Land rental portfolios and farm productivity in Tigray, north Ethiopia

Land rental markets play a central role in reallocating land toward more productive farmers in developing countries. Yet empirical evidence often overlooks the co-adoption of multiple contract types by farmers. This paper examines the productivity implications of individual and combined land rental contracts using farm-level data from Tigray, north Ethiopia. We model the productivity-effects of contract combinations using a Multinomial Endogenous Treatment Effects model that corrects for self-selection on unobservables, and a copula-based binary endogenous selection model allowing for flexible dependence between unobserved determinants of rental participation and productivity. Results reveal substantial endogenous selection into rental contracts and pronounced heterogeneity across contractual arrangements. Fixed-rent contracts—whether adopted alone or in mixed portfolios—consistently enhance productivity after correcting for selection. In contrast, sharecropping tends to reduce productivity, particularly when combined with own cultivation or fixed-rental, suggesting offsetting incentive effects within mixed contract portfolios. Copula-based estimates confirm that rental participation is productivity-enhancing on average and are robust across Gaussian and Frank specifications. Taken together, the findings highlight the importance of contract interaction. Policies promoting land rental markets should therefore focus not only on expanding access but also on fostering incentive-compatible contractual arrangements that support productive land use.