Fixed-rent farming will be preferred when tenants have high enough management skills so that the skill
deficit in fixed-rent farming is small relative to the Marshallian inefficiency of sharecropping. This tells us
that landlords will not offer share contracts if there is an elastic supply of highly skilled tenants. In a more
realistic description of the rural agrarian economy where skills are scarce among tenants, the possibilities
for sharecropping arise. This is not inconsistent with Shaban’s [1987] finding that observed yields are
lower in sharecropped land. Our conclusion is that, while this may be true, the yields in sharecropped land
would be even lower if they were fixed-rented.
The empirical results confirm the main hypothesis that farming skill has a significant positive effect
on the decision to enter fixed-rent contracts. The choice to sharecrop, on the other hand, is determined
largely by the endowments of family labor and bullocks. The main results are summarized in Table 9. We
also find that tenants’ skills do not affect the extent of land leased within each group of tenant. It is
interesting to contrast this result with the conclusion of previous studies [Skoufias 1991, Lanjouw 1999]
that there is a positive correlation between skill and farm size. Our results indicate that this correlation
occurs through the selection of tenants in to fixed-rent farmers (with large farms) and sharecroppers (with
small farms). Therefore, the adjustment of the skill to land ratios is carried out largely through the choice
of contract.
We also find evidence to support the argument we made in the theoretical work that
sharecropping is a second-best efficient solution when tenants are unskilled because they can form a
partnership with a skilled landlord. Our production frontier estimates show that technical efficiency
improves from 38.48% to 52.85%, and yields increase from 1446.31 kg/acre to 1849.91 kg/acre when the
relatively unskilled tenants switch from fixed-rent farming to sharecropping. These values are still
considerably lower than what is observed in other types of farming, but is are a large improvement over
what would have happened if sharecropping was not available to the unskilled tenants.
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