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On the structure of tenancy contracts: theory and evidence from 19th century rural sicily

Bandiera, Oriana (2001) On the structure of tenancy contracts: theory and evidence from 19th century rural sicily. 3032. Centre for Economic Policy Research, London, UK.

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Abstract

In a world with asymmetric information, contractual terms are an important incentive device. This Paper studies the effect of crop characteristics on the choice between short-term and long-term tenancy contracts and on the choice between sharecropping and fixed-rent contracts when the production process depends on two non-contractibles: effort devoted to current production and effort devoted to plant and soil maintenance. Long-term contracts are effective in providing incentives for non-contractible maintenance investment. Since, however, incentive provision is costly, long-term contracts will be employed only when, due to the characteristics of the crop, maintenance benefits are high, or when, due to the characteristics of the tenant, the cost of providing incentives is low. The predictions of the theory are tested on a unique data set containing 705 tenancy contracts signed between 1870 and 1880 in the province of Syracuse (Sicily). The empirical evidence shows that, indeed, long-term contracts were used if the crops grown had higher maintenance needs. Other comparative static results are derived and tested empirically.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.cepr.org
Additional Information: © 2001 Oriana Bandiera
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
Journal of Economic Literature Classification System: O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements: Legal, Social, Economic, and Political
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O12 - Microeconomic Analyses of Economic Development
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q1 - Agriculture > Q15 - Land Ownership and Tenure; Land Reform; Land Use; Irrigation
Sets: Collections > Economists Online
Departments > Economics
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 3032
Date Deposited: 07 May 2008 14:30
URL: http://eprints.lse.ac.uk/4713/

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