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Self-Selection by Contractual Choice and the Theory of Sharecropping
The Bell Journal of Economics
Vol. 9, No. 2 (Autumn, 1978), pp. 344-354
Published by: RAND Corporation
Stable URL: http://www.jstor.org/stable/3003586
Page Count: 11
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There are definite patterns for the organization of production on agricultural land. Production of some crops tends to be organized via wage contracts, while land sown to other crops tends to be rented, and still other crops are most frequently sharecropped. One popular explanation is that contractual choice in agriculture is related to the riskiness of production. Sharecropping, according to this argument, is used with the most risky crops to facilitate risk spreading in a world with incomplete insurance markets. Empirical studies have, however, reported results which conflict with the risk-spreading story. This paper combines the arguments developed in the recent screening literature with empirical results from the sharecropping literature to offer an explanation of the observed use of wage, share, and rent contracts which does not rely on assumptions concerning the relative preferences toward risk bearing by landowners and tenants.
The Bell Journal of Economics © 1978 RAND Corporation