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Informational Rents and Property Rights in Land

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  • Mookherjee, Dilip

Abstract

Is the institution of land tenancy inefficient? If so, why does it survive? This paper uses a complete contracting framework to develop a theory of land ownership in the context of a labour surplus, subsistence economy. Ownership affects efficiency in the presence of incentive-based informational rents, and endogenous credit rationing both arising from wealth constraints. A ceteris paribus transfer of ownership to a tenant or hired labour results in higher bargaining power and rent capture by the cultivator This explains why small owner cultivated farms relying on fairly labour exhibit higher productivity and welfare (in a utilitarian sense). Nevertheless. tenancy results in a Pareto efficient outcome: the market will never effect such transfers. as tenants will not be able to borrow enough to purchase land. The model predicts that productivity differences between tenant and family farms will be large when population pressure on t he land is high, alternative employment opportunities of farmers are low, and their wealth levels are neither too low nor too high.

Suggested Citation

  • Mookherjee, Dilip, 1995. "Informational Rents and Property Rights in Land," Institute for Economic Development 315942, Boston University.
    • Handle: RePEc:ags:bouied:315942
    DOI: 10.22004/ag.econ.315942
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    References listed on IDEAS

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    Cited by:

    1. Banerjee, Abbijit & Mookherjee, Dilip & van Munshi, Kai & Ray, Debraj, 1997. "Inequality , Control Rights and Rent Seeking A Theoretical and Empirical Analysis of Sugar Cooperatives in Maharashtra," Institute for Economic Development 315948, Boston University.

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