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Cost‐Sharing Arrangements under Sharecropping: Moral Hazard, Incentive Flexibility, and Risk
Author(s) -
Braverman Avishay,
Stiglitz Joseph E.
Publication year - 1986
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1241548
Subject(s) - sharecropping , landlord , moral hazard , flexibility (engineering) , incentive , microeconomics , pareto principle , production (economics) , economics , business , cost sharing , information asymmetry , industrial organization , operations management , management , political science , law , biology , agriculture , ecology
This paper explains the rationale and describes the characteristics of cost sharing arrangements in rural developing economies, focusing on the risk and incentive properties of alternative cost contracts and on their flexibility—their ability to adapt to environmental changes. It is shown that where labor inputs are difficult to monitor, the rule that cost shares and output shares be equalized will not hold and is not “constrained pareto efficient,” and that cost‐sharing contracts have a decided advantage over contracts which specify the level of inputs whenever there are asymmetries of information regarding production technology between the landlord and the tenant.