DP12232 Moral Hazard: Experimental Evidence from Tenancy Contracts
|Author(s):||Konrad B. Burchardi, Selim Gulesci, Benedetta Lerva, Munshi Sulaiman|
|Publication Date:||August 2017|
|Keyword(s):||Agricultural Productivity, Contracts, Incentive Effects, Sharecropping|
|JEL(s):||C93, D22, O13|
|Programme Areas:||Development Economics|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12232|
We report results from a field experiment designed to estimate the effects of tenancy contracts on agricultural input choices, risk-taking, and output. The experiment induced variation in the terms of sharecropping contracts: some tenants paid 50% of output in compensation for land usage; others paid 25%; again others paid 50% of output and received cash, either fixed or stochastic. We find that tenants with higher output share utilized more inputs, cultivated riskier crops, and generated 60% more output relative to control. Cash transfers did not effect farm output. We interpret the increase in output as the incentive effect of sharecropping.