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An Asset-Risk Model Of Reverse Tenancy

Author

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  • Bellemare, Marc F.
  • Barrett, Christopher B.

Abstract

Reverse tenancy, wherein poorer landlords rent out land to richer tenants on shares, is a common phenomenon. Yet, it does not fit existing theoretical models of sharecropping and has never before been modeled in the development microeconomics literature. We explain reverse tenancy contracts using an asset risk model that incorporates moral hazard. When choosing the terms of an agrarian contract, the landlord considers the impact of her choice on the probability that she will retain future rights to the rented land. Thus, this model captures the effect of tenure insecurity and property rights on agrarian contracts. The main testable implication of the theoretical model is that, as property rights become more secure, reverse tenancy tends to disappear.

Suggested Citation

  • Bellemare, Marc F. & Barrett, Christopher B., 2003. "An Asset-Risk Model Of Reverse Tenancy," 2003 Annual meeting, July 27-30, Montreal, Canada 22132, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea03:22132
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    File URL: http://ageconsearch.umn.edu/record/22132/files/sp03be02.pdf
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    References listed on IDEAS

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    1. James A. Roumasset, 2002. "The Microeconomics of Agricultural Development in the Philippines," Working Papers 200210, University of Hawaii at Manoa, Department of Economics.
    2. David M. G. Newbery, 1977. "Risk Sharing, Sharecropping and Uncertain Labour Markets," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 585-594.
    3. Otsuka, Keijiro & Chuma, Hiroyuki & Hayami, Yujiro, 1992. "Land and Labor Contracts in Agrarian Economies: Theories and Facts," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 1965-2018, December.
    4. Besley, Timothy, 1995. "Property Rights and Investment Incentives: Theory and Evidence from Ghana," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 903-937, October.
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    Cited by:

    1. Holden, Stein T. & Bezabih, Mintewab, 2006. "Tenure Insecurity, Transaction Costs in the Land Lease Market and their Implications for Gendered Productivity Differentials," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25273, International Association of Agricultural Economists.

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    Keywords

    Risk and Uncertainty;

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