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Multitask moral hazard, incentive contracts and land value

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  • Dubois, P.

Abstract

Sharecropping theory generally does not take into account land fertility. We develop a repeated Principal-Agent model under moral hazard where the Principal delegates the use and maintenance of a productive asset. In a multitask framework, we characterize the optimal spot contract focusing on the best incentives in the contract design. One of the main messages for land tenancy is that in a relationship where long term commitment between a landlord and a non monitored tenant is not possible, moral hazard on the peasant's actions leads to non efficient effort provision both on productio land quality maintenance. The land fertility maintenance tasks may mitigate raise the optimal contract incentives according to the substituability or complementarity of productive and investment tasks. Several important issue for development economics are discussed : discussions on technological innovation, production increase, tenancy reforms, agricultural taxation and sustainable agricultural development are revisited within this framework. ...French Abstract : La théorie économique sur le métayage ne tient généralement pas compte de la fertilité de la terre. L'auteur développe un modèle Principal-Agent répété avec aléa moral oû le Principal délègue l'usage et la maintenance d'un actif productif. Dans un contexte multitâche, il caractérise le contrat spot optimal. Un des principaux messages pour le mode de faire-valoir de la terre est que dans la relation entre un propriétaire et un métayer, lorsque l'engagement de long terme n'est pas possible, l'aléa moral sur les actions de agriculteur conduit à une allocation sous-efficace des efforts de production et d'investissement dans la qualité de la terre. Les tâches de maintien de la fertilité de la terre peuvent réduire ou augmenter les incitations du contrat optimal suivant la substantialité ou complémentarité des tâches de production et d'investissement. Plusieurs questions importantes d'économie du développement sont discutées dans ce nouveau cadre : discussions sur les innovations techniques, l'accroissement de la production, les réformes institutionnelles, la taxation agricole et le développement agricole.

Suggested Citation

  • Dubois, P., 2001. "Multitask moral hazard, incentive contracts and land value," Economics Working Paper Archive (Toulouse) 21, French Institute for Agronomy Research (INRA), Economics Laboratory in Toulouse (ESR Toulouse).
  • Handle: RePEc:rea:inrawp:21
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    File URL: http://www.toulouse.inra.fr/centre/esr/wpRePEc/dub200110.pdf
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    Keywords

    MORAL HAZARD; INCENTIVE CONTRACTS; LAND VALUE; SOIL CONSERVATION; SHARECROPPING ; THEORIE DES CONTRATS; METAYAGE; FERTILITE DU SOL; REFORME DES STRUCTURES; TAXE; PROGRES TECHNIQUE; DEVELOPPEMENT AGRICOLE;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land

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