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WDP32 July1988 Public Disclosure Authorized 32Ez World Bank Discussion Papers Public Disclosure Authorized Tenancyin SouthAsia Public Disclosure Authorized Inderjit Singh ** D 60.3 .Z63 56 988 .2 Public Disclosure Authorized FILECOPY RECENT WORLD BANK DISCUSSION PAPERS No. 1. Public Enterprises in Sub-Saharan Africa. John R. Nellis No. 2. Raising School Quality in Developing Countries: What Investments Boost Learning? Bruce Fuller No. 3. A System for Evaluating the Performance of Government-Invested Enterprises in the Republic of Korea. Young C. Park No. 4. Country Commitment to Development Projects. Richard Heaver and Arturo Israel No. 5. Public Expenditure in Latin America: Effects on Poverty. Guy P. Pfeffermann No. 6. Community Participation in Development Projects: The World Bank Experience. Samuel Paul No. 7. International Financial Flows to Brazil since the Late 1960s: An Analysis of Debt Expansion and Payments Problems. Paulo Nogueira Batista, Jr. No. 8. Macroeconomic Policies, Debt Accumulation, and Adjustment in Brazil, 1965-84. Celso L. Martone No. 9. The Safe Motherhood Initiative: Proposals for Action. Barbara Herz and Anthony R. Measham [Also available in French (9F) and Spanish (9S)1 No. 10. Improving Urban Employment and Labor Productivity. Friedrich Kahnert No. 11. Divestiture in Developing Countries. Elliot Berg and Mary M. Shirley No. 12. Economic Growth and the Returns to Investment. Dennis Anderson No. 13. Institutional Development and Technical Assistance in Macroeconomic Policy Formulation: A Case Study of Togo. Sven B. Kjellstrom and Ayite-Fily d'Almeida No. 14. Managing Economic Policy Change; Institutional Dimensions. Geoffrey Lamb No. 15. Dairy Development and Milk Cooperatives: The Effects of a Dairy Project in India. George Mergos and Roger Slade No. 16. Macroeconomic Policies and Adjustment in Yugoslavia: Some Counterfactual Simulations. Fahrettin Yagci and Steven Kamin No. 17. Private Enterprise in Africa: Creating a Better Environment. Keith Marsden and Therese Belot No. 18. Rural Water Supply and Sanitation: Time for a Change. Anthony A. Churchill, with the assistance of David de Ferranti, Robert Roche, Carolyn Tager, Alan A. Walters, and Anthony Yazer (Continued on the inside back cover.) c,,2/C2~ 32ES World Bank Discussion Papers Tenancyin SouthAsia Inderjit Singh The World Bank Washington, D.C. Copyright ©)1988 The World Bank 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printingJuly 1988 Discussion Papers are not formal publications of the World Bank. They present preliminary and unpolished results of country analysis or research that is circulated to encourage discussion and comment; citation and the use of such a paper should take account of its provisional character. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. Any maps that accompany the text have been prepared solely for the convenience of readers; the designations and presentation of material in them do not imply the expression of any opinion whatsoever on the part of the World Bank, its affiliates, or its Board or member countries concerning the legal status of any country, territory, city, or area or of the authorities thereof or concerning the delimitation of its boundaries or its national affiliation. Because of the informality and to present the results of research with the least possible delay, the typescript has not been prepared in accordance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibility for errors. The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to Director, Publications Department at the address shown in the copyright notice above. The World Bank encourages dissemination of its work and will normally give permission promptly and, when the reproduction is for noncommercial purposes, without asking a fee. Permission to photocopy portions for classroom use is not required, though notification of such use having been made will be appreciated. The most recent World Bank publications are described in the catalog New Publications, a new edition of which is issued in the spring and fall of each year. The complete backlist of publications is shown in the annual Index of Publications,which contains an alphabetical title list and indexes of subjects, authors, and countries and regions; it is of value principally to libraries and institutional purchasers. The latest edition of each of these is available free of charge from Publications Sales Unit, Department F, The World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A., or from Publications, The World Bank, 66, avenue d'lena, 75116 Paris, France. Inderjit Singh is the principal economist in the China Department of the World Bank. Library of Congress Cataloging-in-Publication Data Singh, Inderjit, 1941- Tenancy in South Asia / Inderjit Singh. p. cm. -- (World Bank discussion papers ; 32) Bibliography: p. ISBN 0-8213-1091-7 1. Land tenure--South Asia. 2. Agriculture--Economic aspects- -South Asia. I. Title. II. Series. HD860.3.Z63S56 1988 333.3'0954--dcl9 88-17384 - 3.11 - PREFACE* Many argue that tenurial systems in South Asia are a formidable barrier to technologicalinnovation in agriculture and to having the benefits from such innovation reach the tenant. They argue, too, that tenants on small farms -- the poorest of the poor in rural areas -- get even poorer as the benefits of new techniques go to others, robbing tenants of the meager opportunitiesthey formerly had. Inderjit Singh rejects these arguments. In this paper taken from his research on the institutional structures and relation- ships that shape South Asia's rural economy, he examines tenancy in South Asia and challenges the claims that landholding systems and structures are the prime source of the subcontinent's agricultural woes. Singh contends that the adoption of Green Revolution technologies has increased the demand for labor and boosted real agriculturalwages. The ensuing agriculturalgrowth has broken down many institutional,social, and cultural barriers previously facing the poor. This growth, when combined with measures to increase small farm productivityand wage employment, alleviates rural poverty. Singh sees radical reforms as quick and disruptive solutions to the problems of the rural poor. The real priorities for policymakers are measures to speed agricultural growth and to provide the physical and institutional infrastructureneeded to sustain it. Singh presents tenancy and land reform in a wider context in his forthcoming book "The Great Ascent: The Rural Poor in South Asia". Here the discussion focuses on tenancy's history and its role in the agricultural economy. It also suggests how tenancy promotes or impedes static efficiency and the adoption of new technologies and speculates about the likely evolution of the tenurial system. * I am indebted to Mr T Narain who provided invaluableassistance on the research for this paper. -v- CONTENTS Page THE ORIGINS OF SOUTH ASIA'S TENURIAL SYSTEM ........... ...... 1 TENANCY TODAY: CHARACTERISTICS AND NUMBERS ....... ........... 5 India .......... .*#*..................*.*es................... 8 Bangladesh and Pakistan .......... 18 Conclusions ....... .............. 25 SOME ROLES OF TENANCY IN IMPERFECT RURAL MARKETS............ 27 Tenancy as a Mechanism for Resource Adjustment .......... 27 Tenancy and Incentives . .. ... ............... 29 Tenancy as a Credit System.............................. 30 Tenancy, Risk and Entrepreneurship ...................... 32 Tenancy and Transaction Costs . 35 Tenancy, Indivisibilities, and Economics of Scale....... 36 CAN TENANCY BE EFFICIENT? ....... .. ................... 38 Specification of Inputs. ...............................43 Cost Sharing . .......... 44 Limits on Duration of Leases ............................ 50 Transition to Fixed Rent Tenancy ........................ 53 TENANCY AND NEW AGRICULTURAL TECHNOLOGIES ................... 55 Adoption of HYVs and Use of Nutrients ................... 55 Do Tenants Gain from New Technologies?. ................. 62 The Impact of New Technologies on the Tenurial System... 69 ENDNOTES .... ............................................... 74 ANNEX TABLES ................................................ 81 BIBLIOGRAPHY ....................................................... 103 - vi - TABLES Page Table 1: India: Operating Households by Tenancy Status.... 9 Table 2: India: Changes in Tenancy by States Leased-in Area as Percentage of Total Area Cultivated...... 10 Table 3: India: Area Under Different Types of Tenancies, by Size Group of Holding (1961-62 and 1971-72)... 13 Table 4: India: Tenancy in Small Farms (No. of Holdings Leasing in and Area Leased In) By Size Group of Operated Holdings, 1971-72 .... ............ 16 Table 5: Bangladesh: Changes in Tenant Holdings and Area in Bangladesh (1960 19978) ...................19 Table 6: Farm Holdings and Tenancy by Size, 1977.......... 21 Table 7: Pakistan: Regional Changes in Tenancy, 1960-1972 . ... ........... 23 Table 8: India: Association Between Cost Shares and Crop Shares in Sharecropping Tenancies........... 47 Table 9: Bangladesh: Estimated Distribution of Benefits of Fertilizer Use to
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