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Strategic Lengths of Tenancy Contracts

Author

Listed:
  • Jaideep Roy

    (University of Copenhagen, Institute of Economics)

  • Konstantinos Serfes

    (SUNY at Stony Brook)

Abstract

In a multi-period environment, time is certainly an added dimension in which the principal can differentiate in search of better screening contracts. This idea is used in a two-period model of agriculture without any form of uncertainty, where the landlord offers separating tenurial contracts to screen tenants of different skills, when the skill is private information. The paper shows that a risk neutral landlord wishing to hire a risk averse tenant will always find it optimal to offer a long term fixed rent contract to a high-skilled tenant and a short term sharecropping contract to a low-skilled one.

Suggested Citation

  • Jaideep Roy & Konstantinos Serfes, 2000. "Strategic Lengths of Tenancy Contracts," Discussion Papers 00-17, University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:kuiedp:0017
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    File URL: http://www.econ.ku.dk/english/research/publications/wp/2000/0017.pdf/
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    Keywords

    short-term versus long-term tenancy contracts; risk aversion; screening;

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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