The significantly lower yields in sharecropped lands have troubled economists for a long time.34
Our data also show a large yield deficit in sharecropping relative to both owner-farming and fixed-rent
farming [Table 8]. The mean yield in sharecropped land is only 85% of the mean yield in fixed-rent land
and 86.8% of the mean yield in owner-farmed land.
Frontier estimates show that a considerable part (58%) of the yield differences between share and
fixed-rent farming is explained by technical efficiency differences which includes skill and shirking costs.
The higher yields in fixed-rent farms appear to come from the higher skill levels and the higher technical
efficiency. Increasing the technical efficiency of sharecropped lands to 0.5789 increases the yield only to
1943.14 kg/acre. The remaining difference between share and fixed-rent yields come from the large
differences in input intensities. Although sharecropped farms use labor 39.2% more intensively, they use
considerably less chemicals (71.9%) and machines (35.8%) than in fixed-rent farms. These are both
modern technological improvements that are likely to have large yield effects. It is quite understandable
that share-tenants may not have the financial resources to invest in these modern technologies, and that
neither the tenants nor the landlords face the right incentives to provide optimal amounts. This suggests a
dynamic story where the incentive problems associated with sharecropping leads to a systematic under-
investment in yield-increasing modern technologies such as pesticides and tractors.
Interestingly, the technical efficiency in sharecropping is slightly higher than in owner-farmed land.
This may be because skilled landlords provide management inputs in sharecropped lands, whereas owner-
farmers are likely to have lower skill levels. Although our results support the general consensus that
sharecropping is inefficient, we find that this inefficiency comes from sub-optimal input use rather than
lower technical efficiency. This supports the idea proposed in the theoretical model that landlords and
tenants form a partnership to compensate for the lower technical efficiency of unskilled tenants.
34 See Hayami and Otsuka [1993] for an excellent survey of the voluminous empirical research on this topic. Shaban’s
[1987] study of India is probably the best known work in this literature.
40