Download presentation
Presentation is loading. Please wait.
Published byCameron Thornton Modified over 9 years ago
1
RISK-COPING ARRANGEMENTS IN AGRICULTURE Risk in rural areas is high due to multidimensional reasons: Drastic changes in weather conditions High incidence of infectious diseases Credit market imperfections How do poor peasants cope with risk in rural areas? Main focus in today’s class: “sharecropping”
2
Sharecropping: A contract where output is divided between a landlord and a tenant according to a pre-determined rule (i.e., 50 – 50) Marshallian inefficiency A. Marshall argued that relative to fixed – rent contracts sharecropping is “inefficient” Why? Incentives: Unlike fixed – rent contracts where the tenant retains 100% of the additional output produced, under sharecropping, part of the output goes to the landlord and therefore tenants will undersupply effort
3
Labor Output Costs Production, cost, and economic surplus
4
Labor Output Costs Sharecropping
5
Labor Output Costs Fixed rent
6
So, why is sharecropping so widespread? Tenant is risk – averse Other arguments: a)Risk – neutral tenants and landlords supply effort b)Input costs are shared between landlords and tenants c)Limited liability d)Screening e)Limited liability and non-verifiable effort →WDR (2005), and DR Chapter 5: History, Expectations & Development. Please consult the updated version of your syllabus (course web site).
Similar presentations
© 2025 SlidePlayer.com. Inc.
All rights reserved.