Incentives, Risk, and Agency Costs in the Choice of Contractual Arrangements in Agriculture.

The author develops a theory of the choice of contractual arrangements in agriculture by analyzing the incentives, risk-premia, and agency (supervision and shirking) costs under different contracts using the principal-agent framework. The theory is able to explain many tenancy-related issues, such as why sharecropping can be the optimal contract even in the presence of considerable shirking by the tiller, the predominance of sharecropping and of the 50:50 output share, the coexistence of sharecropping with other contracts, and the tenancy ladder. Copyright 2002 by Blackwell Publishing Ltd