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Moral Hazard: Experimental Evidence from Tenancy Contracts
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies. The Bureau for Research and Economic Analysis of Development, UK; Centre for Economic Policy Research, UK.
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
Number of Authors: 42019 (English)In: Quarterly Journal of Economics, ISSN 0033-5533, E-ISSN 1531-4650, Vol. 134, no 1, p. 281-347Article in journal (Refereed) Published
Abstract [en]

Agricultural productivity is particularly low in developing countries. Output-sharing rules that make farmers less-than-full residual claimants are seen as a potentially important driver of low agricultural productivity. We report results from a field experiment designed to estimate and understand the effects of sharecropping contracts on agricultural input choices, risk-taking, and output. The experiment induced variation in the terms of sharecropping contracts. After agreeing to pay 50% of their output to the landlord, tenants were randomized into three groups: (i) some kept 50% of their output; (ii) others kept 75%; (iii) others kept 50% of output and received a lump-sum payment at the end of their contract, either fixed or stochastic. We find that tenants with higher output shares used more inputs, cultivated riskier crops, and produced 60% more output relative to control. Income or risk exposure have at most a small effect on farm output; the increase in output should be interpreted as an incentive effect of the output-sharing rule. JEL Codes: O12, Q12, Q15.

Place, publisher, year, edition, pages
2019. Vol. 134, no 1, p. 281-347
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:su:diva-175906DOI: 10.1093/qje/qjy023ISI: 000489161300006OAI: oai:DiVA.org:su-175906DiVA, id: diva2:1372577
Available from: 2019-11-25 Created: 2019-11-25 Last updated: 2019-11-25Bibliographically approved

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Burchardi, Konrad B.Lerva, BenedettaSulaiman, Munshi
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