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Moral hazard, financial constraints and sharecropping in El Oulja

Laffont, Jean-Jacques and Matoussi, Mohamed Salah (1995) Moral hazard, financial constraints and sharecropping in El Oulja. Review of Economic Studies, 62 (3). pp. 381-399. ISSN 0034-6527.

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This paper develops a theory of sharecropping which emphasizes the dual role of moral hazard in the provision of effort and financial constraints. The model is compatible with a large variety of contracts as observed in the region of El Oulja in Tunisia. Using an original data set including financial data, various tests of the theory are undertaken. Production functions stressing the role of effort are estimated. The data support the theory which predicts lower efficiency when the tenant's share of output is lower. The role of financial constraints in explaining which type of contract is selected (as well as the implications that financial constraints have upon effort and therefore output) are supported by the data.

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Additional Information:© 1995 The Review of Economic Studies, Ltd. First version received August 1990; final version accepted April 1995 (Eds.). We thank the French Ministry of Foreign Affairs for financial population of El Oulja for its friendly participation. We are grateful to D. Newbery, J. Reid, Q. Vuong and three referees for comments and suggestions. Formerly SSWP 667.
Subject Keywords:Tenants, Landlords, Working capital, Risk aversion, Moral hazard models, Economic models, Wealth, Credit, Economic rent, Farm economics
Issue or Number:3
Record Number:CaltechAUTHORS:20171109-151143639
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:83117
Deposited By: Jacquelyn Bussone
Deposited On:16 Nov 2017 22:58
Last Modified:03 Oct 2019 19:02

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