Credit and Land Contracting: A Test of the Theory of Sharecropping

17 Pages Posted: 21 Apr 2020

See all articles by Narayan Das

Narayan Das

BRAC

Alain de Janvry

University of California, Berkeley - The Richard & Rhoda Goldman School of Public Policy

Elisabeth Sadoulet

University of California, Berkeley - The Richard & Rhoda Goldman School of Public Policy

Date Written: July 2019

Abstract

Choice of a share vs. fixed rent land rental contract has figured prominently in the theory of industrial organization. This theory tells us that, while a share contract is inefficient in a first‐best world, it may be the preferred option under second‐best conditions. It has thus predicted the existence of sharecropping as the potentially preferred contract under conditions of liquidity constraint. Rigorous empirical evidence is, however, still lacking on this basic contribution of theory. We use a randomized experiment in a credit program for landless workers and marginal farmers organized by BRAC in Bangladesh to show that increased access to credit has a large positive effect on the choice of fixed rent over share rent contracts, both in terms of number of contracts and area contracted. As predicted by theory, the magnitude of this shift away from sharecropping is enhanced when the tenant is less exposed to risk. Development programs that facilitate access to credit to potential tenants can thus help them take more efficient land rental contracts.

Keywords: Credit, rental, contracts, sharecropping, fixed rent, Bangladesh

Suggested Citation

Das, Narayan and de Janvry, Alain and Sadoulet, Elisabeth, Credit and Land Contracting: A Test of the Theory of Sharecropping (July 2019). American Journal of Agricultural Economics, Vol. 101, Issue 4, pp. 1098-1114, 2019, Available at SSRN: https://ssrn.com/abstract=3578988 or http://dx.doi.org/10.1093/ajae/aaz005

Narayan Das (Contact Author)

BRAC ( email )

75 Mohakhali
BRAC Center, 75 Mohakhali ,Dhaka, Bangladesh
Dhaka-1212
Bangladesh

Alain De Janvry

University of California, Berkeley - The Richard & Rhoda Goldman School of Public Policy ( email )

2607 Hearst Avenue
Berkeley, CA 94720-7320
United States

Elisabeth Sadoulet

University of California, Berkeley - The Richard & Rhoda Goldman School of Public Policy ( email )

2607 Hearst Avenue
Berkeley, CA 94720-7320
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1
Abstract Views
92
PlumX Metrics