Reverse-Share-Tenancy and Marshallian Inefficiency: Landowners’ Bargaining Power and Sharecroppers’ Productivity

48 Pages Posted: 29 Jun 2013

See all articles by Hagos Hosaena Ghebru

Hagos Hosaena Ghebru

International Food Policy Research Institute (IFPRI)

Stein T. Holden

Norwegian University of Life Sciences

Date Written: May 2013

Abstract

While there are ample empirical studies that claim the potential disincentive effects of sharecropping arrangements, the existing literature is shallow in explaining why share tenancy contracts are prevalent and diffusing in many developing countries. Using a unique tenant-landlord matched dataset from the Tigray region of Ethiopia, we are able to show how the tenants’ strategic response to the varying economic and tenure-security status of the landlords can explain sharecroppers’ productivity differentials. To the best of our knowledge, this is the first study to use tenant–landlord matched data that accounts for both the supply (landlord) and demand (tenant) side characteristics in analyzing sharecroppers’ level of effort and productivity. The study reveals that sharecroppers’ yields are significantly lower on plots leased from landlords who are non-kin, who are female, who have lower income-generating opportunity, and who are tenure insecure than on plots leased from landlords with the opposite characteristics. While, on aggregate, the results show no significant efficiency loss on kin-operated sharecropped plots, more decomposed analyses indicate strong evidence of Marshallian inefficiency on kin-operated plots leased from landlords with weaker bargaining power and higher tenure insecurity. This study thus shows how failure to control for the heterogeneity of landowners’ characteristics can explain the lack of clarity in the existing empirical literature on the extent of moral hazard problems in sharecropping contracts.

Keywords: Agricultural productivity, kinship, Land ownership, Land tenure, Marshallian inefficiency, Matching method, Share cropping, Smallholders, tenant, Tenure, Ethiopia, East Africa, Africa South of Sahara, Africa

JEL Classification: D1, Q15, O13, O18, Q12

Suggested Citation

Hosaena Ghebru, Hagos and Holden, Stein T., Reverse-Share-Tenancy and Marshallian Inefficiency: Landowners’ Bargaining Power and Sharecroppers’ Productivity (May 2013). IFPRI Discussion Paper No. 01270, Available at SSRN: https://ssrn.com/abstract=2286844 or http://dx.doi.org/10.2139/ssrn.2286844

Hagos Hosaena Ghebru (Contact Author)

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

Stein T. Holden

Norwegian University of Life Sciences ( email )

PO Box 5033
NO-1432 Aas
Norway
+47-64965699 (Phone)
+47-64943012 (Fax)

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