Land Lease Markets and Agricultural Efficiency: Theory and Evidence from Ethiopia
In this paper, we develop a theoretical model of land leasing that includes transaction costs, risk pooling motives and non-tradable productive inputs, and investigate the empirical implications of land contracts using data collected from four villages in Ethiopia. We show that sharecropping is the dominant contract if transaction costs are negligible, but that a rental contract may arise if transaction costs decrease with increasing the tenant’s share of output. When this is the case, the theory predicts that area operated by tenants will be an increasing function of their land endowment and that fixed rental contracts will be more likely in situations where transaction costs are higher. We find empirical support for these predictions in the villages studied. We also find that input of labor per hectare is about 25% lower on sharecropped than on other land tenure types, but that the differences in total value of inputs, outputs and profits per hectare are statistically insignificant and relatively small in magnitude. These results support the Marshallian argument that sharecropping reduces labor effort, but also support the “New School” perspective since the magnitude of the inefficiency is relatively small. A bigger source of inefficiency (and inequity) in the study villages appears to be the limited lease market for oxen services, together with credit constraints that limit the ability of land and oxen poor households to purchase oxen.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gavian, Sarah & Ehui, Simeon K., 1999. "Measuring the production efficiency of alternative land tenure contracts in a mixed crop-livestock system in Ethiopia," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 20(1), January.
- Arcand, Jean-Louis & Ai, Chunrong & Ethier, Francois, 2007.
"Moral hazard and Marshallian inefficiency: Evidence from Tunisia,"
Journal of Development Economics,
Elsevier, vol. 83(2), pages 411-445, July.
- Al, C. & Arcand, J.L. & Ethier, F., 1996. "Moral Hazard and Marshallian Inefficiency: Evidence from Tunisia," Cahiers de recherche 9605, Universite de Montreal, Departement de sciences economiques.
- Al, C. & Arcand, J.L. & Ethier, F., 1996. "Moral Hazard and Marshallian Inefficiency: Evidence from Tunisia," Cahiers de recherche 9605, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Jean-Louis ARCAND & AI & ETHIER, 2005. "Moral Hazard and Marshallian Inefficiency:Evidence from Tunisia," Working Papers 200534, CERDI.
- John Pender & Marcel Fafchamps, 2002.
"Land Lease Markets and Agricultural Efficiency: Theory and Evidence from Ethiopia,"
CSAE Working Paper Series
2002-19, Centre for the Study of African Economies, University of Oxford.
- Pender, John L. & Fafchamps, Marcel, 2002. "Land Lease Markets And Agricultural Efficiency: Theory And Evidence From Ethiopia," 2002 Annual meeting, July 28-31, Long Beach, CA 19796, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- John Pender & Marcel Fafchamps, 2004. "Land Lease Markets and Agricultural Efficiency: Theory and Evidence from Ethiopia," Development and Comp Systems 0409021, EconWPA.
- Pender, John L. & Fafchamps, Marcel, 2001. "Land lease markets and agricultural efficiency: theory and evidence from Ethiopia," EPTD discussion papers 81, International Food Policy Research Institute (IFPRI).
- Marcel Fafchamps & John Pender, 2000. "Land Lease Markets and Agricultural Efficiency: Theory and Evidence from Ethiopia," Economics Series Working Papers WPS/2002-19, University of Oxford, Department of Economics.
- Otsuka, Keijiro & Hayami, Yujiro, 1988. "Theories of Share Tenancy: A Critical Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 37(1), pages 31-68, October.
- J. A. Hausman, 1976.
"Specification Tests in Econometrics,"
185, Massachusetts Institute of Technology (MIT), Department of Economics.
- Nottenburg, Carol & Pardey, Philip G. & Wright, Brian D., 2001. "Accessing other people's technology: do non-profit agencies need it? how to obtain it?," EPTD discussion papers 79, International Food Policy Research Institute (IFPRI).
- Otsuka, Keijiro & Chuma, Hiroyuki & Hayami, Yujiro, 1992. "Land and Labor Contracts in Agrarian Economies: Theories and Facts," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 1965-2018, December.
- Laffont, Jean-Jacques & Matoussi, Mohamed Salah., 1988.
"Moral Hazard, Financial Constraints and Sharecropping in El Oulja,"
667, California Institute of Technology, Division of the Humanities and Social Sciences.
- 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.
- Gavian, Sarah & Ehui, Simeon, 1999. "Measuring the production efficiency of alternative land tenure contracts in a mixed crop-livestock system in Ethiopia," Agricultural Economics, Blackwell, vol. 20(1), pages 37-49, January.
- Sadoulet, Elisabeth & Fukui, Seiichi & Janvry, Alan de, 1994. "Efficient share tenancy contracts under risk: The case of two rice-growing villages in Thailand," Journal of Development Economics, Elsevier, vol. 45(2), pages 225-243, December.
- Shaban, Radwan Ali, 1987. "Testing between Competing Models of Sharecropping," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 893-920, October.
- Buchinsky, Moshe, 1994. "Changes in the U.S. Wage Structure 1963-1987: Application of Quantile Regression," Econometrica, Econometric Society, vol. 62(2), pages 405-58, March.
- D. Gale Johnson, 1950. "Resource Allocation under Share Contracts," Journal of Political Economy, University of Chicago Press, vol. 58, pages 111.
- Eswaran, Mukesh & Kotwal, Ashok, 1985. "A Theory of Contractual Structure in Agriculture," American Economic Review, American Economic Association, vol. 75(3), pages 352-67, June.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpdc:0409021. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.