The (Im)possibility of Reverse Share Tenancy

10 Pages Posted: 3 Nov 2008

See all articles by Marc F. Bellemare

Marc F. Bellemare

University of Minnesota - Twin Cities - Department of Applied Economics

Date Written: October 31, 2008

Abstract

Under the usual assumption that the landlord is risk-neutral and the tenant is risk-averse, sharecropping is second-best in that it trades off risk sharing and incentives and leads to a constrained Pareto-efficient agreement. Many, however, have reported instances of reverse share tenancy, i.e., sharecropping in which the landlord is considerably poorer than the tenant. This paper shows that reverse share tenancy is impossible under the canonical model of sharecropping but becomes possible if and only if (i) both the landlord and the tenant can be assumed risk-averse; or (ii) there exist significant transactions costs making sharecropping more desirable than either a wage or fixed rent contract.

Keywords: Sharecropping, Reverse Share Tenancy, Transactions Cost

JEL Classification: D23, D86, O12, Q12

Suggested Citation

Bellemare, Marc F., The (Im)possibility of Reverse Share Tenancy (October 31, 2008). Available at SSRN: https://ssrn.com/abstract=1292957 or http://dx.doi.org/10.2139/ssrn.1292957

Marc F. Bellemare (Contact Author)

University of Minnesota - Twin Cities - Department of Applied Economics ( email )

MN
United States

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