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An Asset Risk Theory of Share Tenancy

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

Abstract

Reverse share 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 economics literature. We explain share tenancy contracts using an asset risk model that incorporates Marshallian inefficiency and thereby provides a credible explanation for share tenancy more broadly, reverse tenancy included. 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. Among the main testable implications of the theoretical model are that, as property rights become more secure, reverse tenancy tends to disappear and that kin contracts tend to make share tenancy more likely.

Suggested Citation

  • Bellemare, Marc F. & Barrett, Christopher B., 2003. "An Asset Risk Theory of Share Tenancy," Working Papers 127203, Cornell University, Department of Applied Economics and Management.
  • Handle: RePEc:ags:cudawp:127203
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    File URL: http://purl.umn.edu/127203
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    References listed on IDEAS

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    1. Joseph E. Stiglitz, 1974. "Incentives and Risk Sharing in Sharecropping," Review of Economic Studies, Oxford University Press, vol. 41(2), pages 219-255.
    2. Seiichi Fukui, 1997. "The Meaning of Kinship in Sharecropping Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 394-406.
    3. Smith, Adam, 1776. "An Inquiry into the Nature and Causes of the Wealth of Nations," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number smith1776.
    4. 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.
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    Cited by:

    1. Fenske, James, 2014. "Imachi Nkwu: Trade and the Commons," The Journal of Economic History, Cambridge University Press, vol. 74(01), pages 39-68, March.
    2. Fenske, James, 2014. "Imachi Nkwu: Trade and the Commons," The Journal of Economic History, Cambridge University Press, vol. 74(01), pages 39-68, March.

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    Keywords

    Risk and Uncertainty;

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