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Participation and Contract Choice in the Tenancy Market

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  • Sharmina Ahmed
  • Christopher Findlay

Abstract

Though sharecropping remains widespread, its determinants are still poorly understood and the debate over the extent of risk-sharing and moral hazard is far from settled. Moreover, existing empirical study very often plague by selection problem. We address both issues using data from rural Bangladesh. This paper tested a model empirically where the leasing decision and contract choice are simultaneous. A modified Heckman model is estimated which avoids the selectivity bias of observed contracts. Empirical tests reject the hypothesis of pure risk sharing and a wide range of support for the presence of moral hazard problem in the choice of contracts.

Suggested Citation

  • Sharmina Ahmed & Christopher Findlay, 2012. "Participation and Contract Choice in the Tenancy Market," EERI Research Paper Series EERI_RP_2012_04, Economics and Econometrics Research Institute (EERI), Brussels.
  • Handle: RePEc:eei:rpaper:eeri_rp_2012_04
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    File URL: http://www.eeri.eu/documents/wp/EERI_RP_2012_04.pdf
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    References listed on IDEAS

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    1. Jin, Songqing & Deininger, Klaus, 2009. "Land rental markets in the process of rural structural transformation: Productivity and equity impacts from China," Journal of Comparative Economics, Elsevier, pages 629-646.
    2. Macours, Karen, 2002. "Insecurity of Property Rights and Matching in the Tenancy Market," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24931, European Association of Agricultural Economists.
    3. Daniel A. Ackerberg & Maristella Botticini, 2002. "Endogenous Matching and the Empirical Determinants of Contract Form," Journal of Political Economy, University of Chicago Press, pages 564-591.
    4. Dubois, Pierre, 2002. "Moral hazard, land fertility and sharecropping in a rural area of the Philippines," Journal of Development Economics, Elsevier, vol. 68(1), pages 35-64, June.
    5. Jean-Jacques Laffont & Mohamed Salah Matoussi, 1995. "Moral Hazard, Financial Constraints and Sharecropping in El Oulja," Review of Economic Studies, Oxford University Press, vol. 62(3), pages 381-399.
    6. Teklu, Tesfaye & Lemi, Adugna, 2004. "Factors affecting entry and intensity in informal rental land markets in Southern Ethiopian highlands," Agricultural Economics, Blackwell, vol. 30(2), pages 117-128, March.
    7. Bengt Holmstrom, 1979. "Moral Hazard and Observability," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 74-91, Spring.
    8. M. A. Taslim, 1989. "Short-Term Leasing, Resource Allocation, and Crop-Share Tenancy," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(3), pages 785-790.
    9. Allen, Douglas & Lueck, Dean, 1992. "Contract Choice in Modern Agriculture: Cash Rent versus Cropshare," Journal of Law and Economics, University of Chicago Press, vol. 35(2), pages 397-426, October.
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    More about this item

    Keywords

    Contract choice; Heckman model; Moral hazard; Risk; Sharecropping.;

    JEL classification:

    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment

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