Development economics - Sharecropping

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Development economics - Sharecropping

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Abstract

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?

Introduction
Sharecropping with cost sharing
The question of contracts linked with unobservable actions and unobservable characteristics
The adverse risk as a dilemma for sharecropping
Transaction costs and other inputs excluded in labour
The example of sharecropping in Sindh, Pakistan
Conclusion
Bibliography

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[...] 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. [...]

[...] Then, the sharecropping contract is defined with 0 [...]

[...] According to Ewaran and Kotwal (1985), the reason that the sharecropping contract exists lies in the supervision and the management. In theory, the landlord is efficient for managing, and the tenant for supervising. If this is the case, the best contract is the sharecropping. Under non-forced contract and under non-risk aversion uncertainly, sharecropping is credible with Murrel and Ewaran's models. If agents are sensible under risks, sharecropping could be justified by risk sharing. Consequently, if the landlord is risk neutral and the tenant is risk averse i.e. [...]

[...] Most tenants take their own decisions on the selling. Costs of farm inputs are borne by the tenants. After the cocoa farm is established by the tenant, the cocoa trees on the farm, rather than the cocoa harvest, are divided into two equal parts, and each part is independently managed by the landlord and the tenant. In both cases, landlords and tenants share the cocoa harvest in an agreed proportion. Many contracts are made between relatives. In Ghanaian share contracts, is important. [...]

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