Raising tenants' share in crop-sharing contracts between landlords and tenants in developing countries can boost agricultural output, by providing tenants with the right incentive to raise agriculture productivity. Bocconi University's Selim Gulesci and colleagues came to this conclusion making use of a field experiment in Uganda.
Crop-sharing rules that assign 50% of the crop to the landlord and 50% to the tenant are common in developing countries and have often been blamed for low agricultural productivity. In a famous proposition, Alfred Marshall, in 1890, argued that "when the cultivator has to give to his landlord half of the returns to each dose of capital and labor that he applies in the land, it will not be to his interest to apply any doses the total return to which is less than twice enough to reward him".
Thanks - Cooperation - NGO - BRAC - Program
Thanks to the cooperation of the NGO BRAC, which used to run a crop-sharing program in Uganda, Prof. Gulesci and his colleagues were able to design a field experiment (a randomized controlled trial) that proved Marshall's insight correct. Fifty-fifty sharing agreements are indeed inefficient and raising tenants' share to 75% could raise the output by 60%, thanks to more investment and more risk-taking.
The scholars randomly divided 304 tenants, located in 237 villages, into three groups: one group maintained the 50-50 agreement, the...
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