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Development economics - Sharecropping

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  1. Introduction
  2. Sharecropping with cost sharing
  3. The question of contracts linked with unobservable actions and unobservable characteristics
  4. The adverse risk as a dilemma for sharecropping
  5. Transaction costs and other inputs excluded in labour
  6. The example of sharecropping in Sindh, Pakistan
  7. Conclusion
  8. Bibliography

In sharecropping contracts with cost sharing, why is the cost share borne by the tenant equal to the output share accruing to him?

Sharecropping is an arrangement or system of farming, prevalent in many Less Developed Countries in which a tenant works on land which he does not own, giving the landowner a share of the output, instead of paying him a fixed rent -typical of fixed rent contracts. The tenant's output is shared between the landlord and the tenant with a predetermined proportion. There is no fixed part of the rent. Sharecropping with cost sharing is a contract where inputs costs are shared between the landlord and the tenant.
Is it not uncommon to observe that in sharecropping contracts with cost sharing, the cost share borne by the tenant is equal to the output share accruing to him? Why does sharecropping with cost sharing exist? What are the advantages for tenants and for landlords? Do share contracts with the cost share borne by the tenant equivalent to the output share accruing to him exist in the world?

[...] Conclusion The sharecropping is justified in the diversification of risks and the landlord's incentive to share costs. A sharecropping contract is justified if the part of the output received to the tenant is higher than the share of input purchased. Furthermore, share contracts are efficient under the theory of risk averse. Share contracts with cost sharing are found. To sum up the Ghanaian case, under a sharecropping contract, the tenant has access to land for food crops. After the tenant gives the landlord an amount that satisfied the landlord, the tenant could keep the entire extra output that any additional inputs on his part may yield. [...]

[...] Although the participants bore the inputs, it is not a sharecropping contract but just an arrangement in cocoa production. In Ghana, two types of sharecropping contracts with cost sharing exist. The first contract is Nhwesoo. The tenants manage already-established cocoa farm and in return get a share of the output from the cocoa harvest. Tenants are responsible for the weeding, spraying and harvesting of cocoa and provide labour (input). He can hire farmers, but in this case he is in charged to pay them. [...]

[...] Sharecropping with cost sharing should certainly consider that inputs are shared between the landlord and the tenant. The thesis supported by the Marshallian theory is that the tenant is not encouraged to work when the cost share borne is the same as the output share given to him. On the assumption that tenant's efforts cannot be observable, the Marshallian theory of share contract is not relevant. The tenant's labour is unobservable. In addition, cost sharing takes place only if inputs are observable and enforceable. [...]

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