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Moral Hazard: Experimental Evidence from Tenancy Contracts

Author

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  • Burchardi, Konrad B.
  • Gulesci, Selim
  • Lerva, Benedetta
  • Sulaiman, Munshi

Abstract

We report results from a field experiment designed to estimate the effects of tenancy contracts on agricultural input choices, risk-taking, and output. The experiment induced variation in the terms of sharecropping contracts: some tenants paid 50% of output in compensation for land usage; others paid 25%; again others paid 50% of output and received cash, either fixed or stochastic. We find that tenants with higher output share utilized more inputs, cultivated riskier crops, and generated 60% more output relative to control. Cash transfers did not effect farm output. We interpret the increase in output as the incentive effect of sharecropping.

Suggested Citation

  • Burchardi, Konrad B. & Gulesci, Selim & Lerva, Benedetta & Sulaiman, Munshi, 2017. "Moral Hazard: Experimental Evidence from Tenancy Contracts," CEPR Discussion Papers 12232, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12232
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    References listed on IDEAS

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    More about this item

    Keywords

    Agricultural Productivity; Contracts; Incentive Effects; Sharecropping;

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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