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Contractual structure in agriculture with endogenous matching

Ghatak, Maitreesh and Karaivanov, Alexander (2013) Contractual structure in agriculture with endogenous matching. Journal of Development Economics, Online . ISSN 0304-3878 (In Press)

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Abstract

We analyze optimal contractual forms and equilibrium matching in a double-sided moral hazard model of sharecropping similar to Eswaran and Kotwal (1985). We show that, with endogenous matching, the presence of moral hazard can reverse the matching pattern relative to the first best, and that even if sharecropping is optimal for an exogenously given pair of agent types, it may not be observed in equilibrium with endogenous matching. The economy with endogenous matching features less sharecropping compared to an economy with agent types drawn at random from the same distribution. This suggests that studies of agency costs in sharecropping may underestimate their extent if focusing only on the intensive margin and ignoring the extensive margin.

Item Type: Article
Official URL: http://www.journals.elsevier.com/journal-of-develo...
Additional Information: © 2013 Elsevier B.V.
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor > HD100 Land Use
S Agriculture > S Agriculture (General)
Sets: 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
Date Deposited: 21 Jun 2013 11:00
URL: http://eprints.lse.ac.uk/50912/

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