neutrality assumption. The labor tasks can be expressed in the following general form;
Mi = M ( 5, Ti ; x ) V i = 1,2 [2]
Mi is an aggregate of the skill level (S) and the time spent (Ti). M is assumed linear homogeneous,
increasing and concave in S and Ti. Parameter x, (0 < x < 1) describes the relative intensity of skill in Mi
and S is exogenously given to each individual. The tasks M1 and M2 are distinguished by appropriate
restrictions on the parameter x. Specifically,
M1 = M(5, T1;x > 0) = SxTl' x and M2 = M(5,T2;x = 0) = T2 [3]
The production function can be simplified by substituting the above expressions for M1 and M2,
Q = ΘF[T1,T2, H;S] [4]
where F is increasing and concave in all its arguments, and linear homogeneous in T1, T2 and H for a
given level of S.10 The three types of contracts are identified by the following income schedule of the
tenants:
Y = a Q + β H 11
1) Owner-Operator/Fixed-Wage Labor α = 0 , β >0
2) Share Tenancy 0<α<l [5]
3) Fixed Rental Tenancy α =1 and β <0
We assume there is one landlord who owns H units of land and an infinite supply of landless
workers (potential tenants). The landlord self-cultivates a part of the land, Ho, and leases out Hs units of
land to sharecroppers and the remaining Hf units to fixed-rent tenants. Both landlords and tenants face
10 This is consistent with the view that there are increasing returns to scale when skills are included as an argument in
the production function [Bliss and Stern 1982].
11 According to this definition, both share and fixed rent tenants make a fixed payment (which may be negative) per
unit of land leased to the landlord. This is somewhat different to the specification of a fixed rent independent of the
farm size introduced by Stiglitz [1974]. However, since both the fixed rent (βs ,βf ) and the parcel size (Hs ,Hf) are the
landlord’s choice variables, this does not change our conclusions in any way.