Journal Article

Land Tenancy and Non-Contractible Investment in Rural Pakistan

Hanan G. Jacoby and Ghazala Mansuri

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 75, issue 3, pages 763-788
Published in print July 2008 | ISSN: 0034-6527
Published online July 2008 | e-ISSN: 1467-937X | DOI: https://dx.doi.org/10.1111/j.1467-937X.2008.00481.x
Land Tenancy and Non-Contractible Investment in Rural Pakistan

More Like This

Show all results sharing these subjects:

  • Information, Knowledge, and Uncertainy
  • Housing Markets, Production Analysis, and Business Location
  • Agricultural Economics

GO

Show Summary Details

Preview

Commitment failure lies at the core of incomplete contract theory, yet its quantitative significance has rarely been assessed. Using detailed plot-level data from rural Pakistan, we find that non-contractible investment is underprovided on tenanted land, even after controlling for the endogeneity of leasing decisions. Our evidence also indicates that moral hazard in investment effort alone cannot explain this inefficiency. Instead, imperfect commitment appears to be the driving mechanism, since even plots taken on fixed rent contracts where all the rent is paid upfront receive lower investment than owner-cultivated plots. We further show that a considerable portion of the variation in tenancy duration, and hence in the security of tenure, is due to heterogeneity across landlords. One interpretation of this finding is that landlord reputation is important in mitigating hold-up.

Keywords: D86; Q15; R31

Journal Article.  11666 words.  Illustrated.

Subjects: Information, Knowledge, and Uncertainy ; Housing Markets, Production Analysis, and Business Location ; Agricultural Economics

Full text: subscription required

How to subscribe Recommend to my Librarian

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.