Campus Units

Economics

Document Type

Article

Publication Version

Published Version

Publication Date

4-2004

Journal or Book Title

Economic Development and Cultural Change

Volume

52

Issue

3

First Page or Article ID Number

617

Last Page

642

DOI

10.1086/420685

Abstract

For more than 2 centuries, economists have been interested in agricultural contracts, especially landowner-tenant contracts. The early work by Marshall (1890) argued that share tenancy was inefficient relative to owner cultivation and should not be expected to persist when other arrangements are available. Later D. Gale Johnson (1950) and Cheung (1969) argued that, if landowners can costlessly monitor and enforce tenants’ effort, then share tenancy can compete effectively with owner cultivation or cash rental. Subsequently, Stiglitz (1974) and Newberry and Stiglitz (1979) introduced principal-agent models in the more realistic case where monitoring is costly to study optimal landowner-tenant risk sharing given the need to study adequate tenant incentives. More recently, Prendergast (2002) suggested that the negative trade-off between effort incentives and risk is tenuous or wrong in principal-agent contracting, including share tenancy in agriculture. Allen and Lueck (2002) have also argued against risk sharing as a motive for share tenancy in developed countries because of the presence of well-developed instruments for risk sharing that are available regardless of tenancy arrangements. Based on transactions costs, they predict that cash rental is more likely than share rental when farmland value is low.

Comments

This article is from Economic Development and Cultural Change 52 (2004): 617, doi: 10.1086/420685. Posted with permission.

Copyright Owner

Wallace E. Huffman and Richard E. Just

Language

en

File Format

application/pdf