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Contract choice in agriculture with joint moral hazard in effort and risk

Ghatak, Maitreesh (2000) Contract choice in agriculture with joint moral hazard in effort and risk. Journal of Development Economics, 63 (2). pp. 303-326. ISSN 0304-3878

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Identification Number: 10.1016/S0304-3878(00)00116-4

Abstract

We analyze optimal contract choice in agriculture when there is joint moral hazard on the part of the farmer in the supply of effort and the riskiness of the technique of cultivation. In the presence of limited liability, high-powered incentive contracts such as fixed rental contracts will induce the farmer to adopt techniques of cultivation that are too risky from the point of view of the landlord. On the other hand, low-powered incentive contracts such as fixed wage contracts will induce the farmer to supply too little effort. We show that sharecropping contracts emerge as a natural solution to balance these two conflicting considerations.

Item Type: Article
Official URL: http://www.elsevier.com/wps/find/journaldescriptio...
Additional Information: © 2000 Elsevier Science B.V.
Subjects: H Social Sciences > HB Economic Theory
S Agriculture > S Agriculture (General)
Sets: Departments > Economics
Collections > Economists Online
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Date Deposited: 14 Apr 2011 09:49
Last Modified: 14 Apr 2011 09:49
URI: http://eprints.lse.ac.uk/id/eprint/35609

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