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  • 1.
    Burchardi, Konrad B.
    et al.
    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.
    Gulesci, Selim
    Lerva, Benedetta
    Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
    Sulaiman, Munshi
    Moral Hazard: Experimental Evidence from Tenancy Contracts2019In: Quarterly Journal of Economics, ISSN 0033-5533, E-ISSN 1531-4650, Vol. 134, no 1, p. 281-347Article in journal (Refereed)
    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.

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