Sen, Debapriya (2009): A theory of sharecropping: the role of price behavior and imperfect competition.
Download (646kB) | Preview
This paper proposes a theory of sharecropping on the basis of price behavior in agriculture and imperfectly competitive nature of rural product markets. We consider a contractual setting between one landlord and one tenant with seasonal variation of price, where the tenant receives a low price for his output while the landlord can sell his output at a higher price by incurring a cost of storage. We consider two different classes of contracts: (i) tenancy contracts and (ii) crop-buying contracts. It is shown that sharecropping is the optimal form within tenancy contracts and it also dominates crop-buying contracts provided the price variation is not too large. Then we consider interlinked contracts that have both tenancy and crop-buying elements and show that there are multiple optimal interlinked contracts. Finally, proposing an equilibrium refinement that incorporates imperfect competition in the rural product market, it is shown that the unique contract that is robust to this refinement results in sharecropping.
|Item Type:||MPRA Paper|
|Original Title:||A theory of sharecropping: the role of price behavior and imperfect competition|
|Keywords:||Sharecropping, price variation, imperfect competition, tenancy contracts, crop-buying contracts, interlinkage, the epsilon-agent|
|Subjects:||D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior ; Transaction Costs ; Property Rights
J - Labor and Demographic Economics > J4 - Particular Labor Markets > J43 - Agricultural Labor Markets
O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements
D - Microeconomics > D0 - General > D02 - Institutions: Design, Formation, Operations, and Impact
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q15 - Land Ownership and Tenure ; Land Reform ; Land Use ; Irrigation ; Agriculture and Environment
O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O12 - Microeconomic Analyses of Economic Development
|Depositing User:||Debapriya Sen|
|Date Deposited:||29. Apr 2009 07:29|
|Last Modified:||12. Feb 2013 17:53|
Allen, F. (1982) On share contracts and screening, The Bell Journal of Economics, 13, 541-547.
Assies, W. (2006) Land tenure legislation in a pluri-cultural and multi-ethnic society: the case of Bolivia, Journal of Peasant Studies, 33, 569-611.
Baker, C. (1984) The Indian Rural Economy 1880-1955: The Tamilnad Countryside, Oxford University Press.
Banerji, S. (1995) Interlinkage, investment and adverse selection, Journal of Economic Behavior and Organization 28, 11-21.
Bangladesh Agricultural Research Council (2000), Assessing the Problems of Foodgrain Marketing and Food Distribution System in relation to Achieving Food Security in Bangladesh, Summary Report, Bangladesh Centre for Advanced Studies.
Bardhan, P. (1984) Land, Labor, and Rural Poverty: Essays in Development Economics, Oxford University Press.
Bardhan, P. (Ed.), (1989) The Economic Theory of Agrarian Institutions, Clarendon Press: Oxford.
Bardhan, P. (2005) Poverty, Agrarian Structure, and Political Economy in India: Selected Essays, Oxford University Press.
Bardhan, P. and Rudra, A. (1978) Interlinkage of land, labour and credit relations: an analysis of village survey data in east India, Economic and Political Weekly, 13, 367-384. Reprinted in Bardhan (2005), 90-118.
Bardhan, P. and Srinivasan, T.N. (1971) Cropsharing tenancy in agriculture: a theoretical and empirical analysis, American Economic Review, 61, 48-64.
Bardhan, P. and Singh, N. (1987) On moral hazard and cost sharing under sharecropping, American Journal of Agricultural Economics, 69, 382-383.
Bardhan, P. and Udry, C. (1999) Development Microeconomics, Oxford University Press.
Basu, K. (1983) The emergence of isolation and interlinkage in rural markets, Oxford Economic Papers, 35, 262-280.
Basu, K. (1992) Limited liability and the existence of share tenancy, Journal of Development Economics, 38, 203-220.
Basu, K. (1998) Analytical Development Economics: The Less Developed Economy Revisited, Oxford University Press.
Basu, K., Bell, C. and Bose, P. (2000) Interlinkage, limited liability and strategic interaction, Journal of Economic Behavior and Organization, 42, 445-462.
Bell, C. (1977) Alternative theories of sharecropping: some tests using evidence from north-east India, Journal of Development Studies, 13, 317-346.
Bell, C. and Srinivasan, T.N. (1989) Some aspects of linked product and credit market contracts among risk-neutral agents. In: Bardhan (1989).
Bhaduri, A. (1973) A study in agricultural backwardness under semi-feudalism, Economic Journal, 83, 120-137.
Binswanger, H.P. and Rosenzweig, M.R. (Ed.), (1984) Contractual Arrangements, Employment, and Wages in Rural Labor Markets in Asia, Yale University Press.
Bliss, C. and Stern, N. (1982) Palunpur: Studies in the Economy of an Indian Village, Oxford University Press.
Braverman, A. and Stiglitz, J.E. (1982) Sharecropping and interlinking of agrarian markets, American Economic Review, 72, 695-715.
Chattopadhyay, M. (1979) Relative efficiency of owner and tenant cultivation: a case study, Economic and Political Weekly, 14, A93-A96.
Cheung, S.N.S. (1969) The Theory of Share Tenancy, University of Chicago Press.
Clark, R.J. (1968) Land reform and peasant market participation on the north highlands of Bolivia, Land Economics, 44, 153-172.
Eswaran, M. and Kotwal, A. (1985) A theory of contractual structure in agriculture, American Economic Review, 75, 352-367.
Forster, R. (1957) The noble as landlord in the region of Toulouse at the end of the old regime, Journal of Economic History, 17, 224-244.
Gangopadhyay, S. and Sengupta, K. (1986) Interlinkages in rural markets, Oxford Economic Papers, 38, 112-121.
Gangopadhyay, S. and Sengupta, K. (1987) Small farmers, moneylenders, and trading activity, Oxford Economic Papers, 75, 333-342.
Ghatak, M. and Pandey, P. (2000) Contract choice in agriculture with joint moral hazard in effort and risk, Journal of Development Economics, 63, 303-326.
Hallagan, W. (1978) Self-selection by contractual choice and the theory of sharecropping, The Bell Journal of Economics, 9, 344-354.
Hayami, Y. and Otsuka, K. (1993) The Economics of Contract Choice: An Agrarian Perspective, Clarendon Press: Oxford.
Hayami, Y., Kikuchi, M. and Marsiaono, E.B. (1999) Middlemen and peasants in rice marketing in the Philippines, Agricultural Economics, 20, 79-93.
Jackson, R.H. (1994) Regional Markets and Agrarian Transformation in Bolivia: Cochabamba, 1539-1960, University of New Mexico Press, Albuquerque.
Jodha, N.S. (1984) Agricultural tenancy in semiarid tropical India. In: Binswanger and Rosenzweig (1984).
Jayachandran, S. (2006) Selling labor low: wage responses to productivity shocks in developing countries, Journal of Political Economy, 114, 538-574.
Johnson, D.G. (1950) Resource allocation under share contracts, Journal of Political Economy, 58, 111-123.
Laffont, J.J. and Matoussi, M.S. (1995) Moral hazard, financial constraints and sharecropping in El Oulja, Review of Economic Studies, 62, 381-399.
Marshall, A. (1920) Principles of Economics, Macmillan & Co., Limited (Reprint Edition: 1961).
Mendelberg, U. (1985) The Impact of the Bolivian Agrarian Reform on Class Formation, Latin American Perspectives, Vol. 12, pp. 45-58.
Mitra, P.K. (1983) A theory of interlinked rural transactions, Journal of Public Economics, 20, 167-191.
Munshi, K. and Rosenzweig, M.R. (2007) Why is mobility in India so low? Social insurance, inequality, and growth, BREAD Working Paper No. 092.
Muthoo, A. (1998) Renegotiation-proof tenurial contracts as screening mechanisms, Journal of Development Economics, 56, 1-26.
Myers, R.H. (1984) The Chinese Peasant Economy: Agricultural Development in Hopei and Shantung, 1890-1949, Harvard University Press, Cambridge, Massachusetts.
Newbery, D.M.G. (1977) Risk sharing, sharecropping and uncertain labour markets, Review of Economic Studies, 44, 585-594.
Newbery, D.M.G. and Stiglitz, J.E. (1979) Sharecropping, risk-sharing, and the importance of imperfect information. In: Roumasset, J.A., Boussard, J.M. and Singh, I. (Eds.), Risk, Uncertainty, and Agricultural Development, Agricultural Development Council, New York.
Platteau, J-P. and Abraham, A. (1987) An inquiry into quasi-credit contracts: the role of reciprocal credit and interlinked deals in small-scale fishing communities, Journal of Development Studies, 23, 461-490.
Rao, C.H.H. (1971) Uncertainty, entrepreneurship, and sharecropping in India, Journal of Political Economy, 79, 578-595.
Ravallion, M. and Chaudhuri, S. (1997) Risk and insurance in village India: comment, Econometrica, 65, 171-184.
Ray, D. and Sengupta, K. (1989) Interlinkage and the pattern of competition. In: Bardhan (1989).
Ray, T. (1999) Share tenancy as strategic delegation, Journal of Development Economics, 58, 45-60.
Ray, T. and Singh, N. (2001) Limited liability, contractual choice, and the tenancy ladder, Journal of Development Economics, 66, 289-303.
Reddy, M.A. (1996) Lands and Tenants in South India: A Study of Nellore District 1850-1990, Oxford University Press.
Reid, J.D.R., Jr. (1976) Sharecropping and agricultural uncertainty, Economic Development and Cultural Change, 24, 549-576.
Rosenzweig, M.R. and Binswanger, H.P. (1993) Wealth, weather risk and the composition and profitability of agricultural investments, Economic Journal, 103, 56-78.
Rosenzweig, M.R. and Wolpin, K.I. (1986) Credit market constraints, consumption smoothing, and the accumulation of durable production assets in low-income countries: investments in bullocks in India, Journal of Political Economy, 101, 223-244.
Roy, J. and Serfes, K. (2001) Intertemporal discounting and tenurial contracts, Journal of Development Economics, 64, 417-436.
Rudra, A. (1992) Political Economy of Indian Agricultue, K.P. Bagchi & Company.
Rudra, A. and Bardhan, P. (1983) Agrarian Relations in West Bengal: Results of Two Surveys, Somaiya Publications Private Limited.
Sengupta, K. (1997) Limited liability, moral hazard and share tenancy, Journal of Development Economics, 52, 393-407.
Shaban, R.A. (1987) Testing between competing models of sharecropping, Journal of Political Economy, 41, 893-920.
Sharma, N. and Dreze, J. (1996) Sharecropping in a north Indian village, Journal of Development Studies, 33, 1-39.
Sharma, S.D. (1997) Agricultural growth and 'trickle-down' reconsidered: evidence from rural India, Development in Practice, 7, 267-275.
Shetty, S. (1988) Limited liability, wealth differences, and the tenancy ladder in agrarian economies, Journal of Development Economics, 29, 1-22.
Singh, N. (1989) Theories of sharecropping. In: Bardhan (1989).
Stiglitz, J.E. (1974) Incentives and risk sharing in sharecropping, Review of Economic Studies, 95, 219-255.
Stiglitz, J.E. (1989) Rational peasants, efficient institutions, and a theory of rural organization: methodological remarks for development economics. In: Bardhan (1989).
Taylor, R.H. (1943) Post-bellum southern rental contracts, Agricultural History, 17, 121-128.
Townsend, R.M. (1994) Risk and insurance in village India, Econometrica, 62, 539-591.
Udry, C. (1990) Credit markets in Northern Nigeria: credit as insurance in a rural economy, World Bank Economic Review, 4, 251-269.