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World Bank Document World Bank Reprint Series: Number Forty-eight Public Disclosure Authorized Clive Bell Alternative Theories of Sharecropping: Some Tests Using Evidence from Northeast India Public Disclosure Authorized Public Disclosure Authorized Reprinted from The Jroznal of Dezvelopm?nent Stildies 13 (July 1977) Public Disclosure Authorized The most recent editions of Catalog of Publicathons, describing the full range of World Bank puLblications, and World Bank Research Progrnain, describing each of the continuing research programs of the Bank, are available without charge from: The World Bank, Publications Unit, 1818 H Street, N.W., WVasliingtoni, D.C. 20433 U.S.A. WORLD BANK BOOKS ABOUT DEVELOPMIENT Research Publications InrernationalComparisons of Real Produtct anid PurchasingPowoer by Irving B. Kravis, Alan Heston, and Robert Summers, published by The Johns Hopkiins University Press, 1978 Experiments in Family Planniing:Lessons fromiz the Developing World by Roberto Cuca and Catherine S. Pierce, published by The Johns Hopkins University Press, 1978 Income Distribution Policy in the Developinkg Comntries: A Case Study of Korea by Irma Adelman and Sherman Robinson, published by Stanford University Press (in the Con monwealth, Oxford University Press), 1978 Interdependence in Planninig: Multilevel Prograingiii Stuidies of the Ivory Coastby Louis M. Goreux, published by The Johns Hopkins University Press, 1977 The Mining Iniduistry and the Developing Countries by Rex Bosson and Bension Varon, published by Oxford University Press, 1977 Patterns in Household Demand and Saving by Constantino Lluch, Alan Powell, and Ross Williams, published by Oxford University Press, 1977 Unskilled Labor for Developmenit: Its Ecopnomic Costby Orville McDiarmid, puLblished by The Johns Hopkins University' Press, 1977 Electricity Economnics: EssaY,s anid Case Stud1ies by Ralph Turvey and Dennis Anderson, published by The Johns Hopkins University Press, 1977 Housing for Low-income Urban Famiiilies: Econiomics and Policy in the Developing World by Orville F. Grimes, Jr., published by The Johns Hopkins University Press, 1976 Village WVater Supply: Economics and Policiy in the Dezveloping World by Robert Saunders and Jeremy Warford, published by The Johns Hopkins University Press, 1976 Econiomic Ainalysis of Projectsby Lyn Squire and Hernman C. van der Tak, published by The Johns Hopkins University Press, 1975 Thn D3esignz of Ruiral Dezvelopmenit: Lessons frotmi Africu by Uma Lele, published by The Johns Hopkins University Press, 1975 Economy-Wide Models and Developinent Planniniig edited. by Charles R. Blitzer, Peter B. Clark, and Lance Taylor, published by Oxford University Press, 1975 Patternis of Develop7mient, 1950-1970 by Hollis Clienery And Moises Syrquin with Hazel ElkiTigton, published by Oxfoird University Press, 1973 A System of InternationalComparisons of Gross Produtct arid P-:Nrchasing Powerby frving B. Kravis, Zoltan Kenessey, Alan Heston, and Robert Suummers, ptublislhed by The Johns Hopkins University Press, 1975 Country Economic Reports Commonwenalth Caribbean: The Intiegr$ationI Experienice by Sidney E. Cliernick and others, published by The Johns Hopkinis Uni;-2rsity Press, 1978 Ivory Coast: The Challenge of Success by BEastiaarn den Tuinder and others, published by The Johns Hopkins University Press, 1978 Kenya: IZto the Seconid Decade by John Burrows and others, puLblislhed by The Johns Hopkins University Press, 1975 (L0t)ilItIC1d on inside back cOver) Alternative Theories of Sharecropping: Some Tests Using Evidence from Northeast India by Clive Bell' The recent debate conceming the efficiency of sharecropping contracts yields a number of testahh hypotheses, four of which can be examined in the light of some primary data for a group of sharecroppers itn northeast Bihar. The salient feature of the empirical analysis is the companrson of the resource allocation patterns on owned and rented land cultivated by the same farrmer, which provides a more powerful test of inefficiency than those advocated previously. Broadly speaking, the findings support the 'Marshallian' position that such contracts do involve ineffici- ency-in the Bihar context, at least. I IN4TRODUCI ION Until recently, at least, economists reared in the Anglo-Saxon tradition, as exemplified by Marshall [1920: 534-37j, have had a poor opinion of sharecropping. Their verdict ran as follows: a tenant whose contract stipulates solely the fraction of gross output to be paid as rent will have an incentive to use variable inputs less intensively than an owner- operator or a tenant leasing in land on a fixed rent basis. Under competitive conditions, fixed rent contracts will lead to a pattern of resource allocation which is Pareto optimal, so that production under sharecropping will not be efficient. Those in the Marxist tradition also have small love for sharecropping. Their analysis rests on the view that it is a device for extracting a surplus from the peasantry in certain kinds of agrarian settings, usually terrmed 'quasi-' or 'semi-feudal'. The demise of sharecropping commonly heralds an historically progressive change in the mode of production, and is therefore to be welcomned. (The static-dynamic contrast in these two positions is evident.) The modern challenge to the conventional (Anglo-Saxon) wisdom was mounted by Cheung [1968, 1969]. His important work combined theoretical and empirical analysis to arrive at the conclusion that resource allocation under fixed rent and (suitably formulated) share- cropping contracts will be identical. There followed a number of theoretical contributions to the lterature, with Bardhan and Srinivasan [1971] and Bell and Zusman [1976] pursuing a 'Marshallian' line, and Newbery [1973, 1975, 19,76a. b]and Stiglitz[1974]-hcrcafter, the 'new school'-extending Cheung's approach in a major vay.l But the Economist in the Development Research CenTre of the World Bank, on leave from thc Institute of Development Studies, Sussex. I owe a considerable debt to Michael Lipton wbo, in discussion and correspondence, has clarified and improv'ed the ideas and arguments in this paper. My thanks are due also to Bela Balassa, Peter Hazell and Pasquale Scandizzo for their comments on an earlier draft. Surviving errors of analysis, inference and interpretation are mine alone. ,ft N ~N\I 8IAfTIf: ( ii'NIHl'T ST'UDIES .' h1 in t.:,klvon the quest for Wvt,- it,a ,d7 ', * ra4c ttg and in enntive sNystems. Given -I` OF-r mliklvc-nfmcd. nfy aimed at limiting a I may Iet:ttl y liy claim, or even at ' ,'s w. tirely, the fortunes of the ?vLr "it1 2 -illy mnuch existing land tenure '7. NibI of the predictions of the . i..' lpjqp to LCTr icial tests using a ',o frotl Vnrr'a l)istrict, Bihar. A key U -eitset. As most sharecroppers in r a du'ir 'xxii. close attention is paid to ,pcd land cultivated by the NS t uvit'P pure' sharecroppers, *t- *si- on owrnd sharecrop 5 rsof tenant, also. To anticipate, i i< ` i-ll 1iii' on farms with bo4 n - In% t; 'theungian' as regards the V; -'. Oii II, the essential features s in oitlined in brief, and a Ii t r06 IprediCtiOns (diffcr are '.it Ei,Lkgrourld features of the i i iitio.'atl Tlihe hypotheses are of valtue aded and policy *6ic It o-n w1hich the predictions of the two A . a i ?i h out the 9n essential features of ; t:of xpatk ce it is not possibleto ,I se V Ihat follows is designed 4 jX '1~ I,,i. itroerneni in a way which th2eli! evidence. ''ride:r a perfectly certain and I U 's ri r,Ohrced with land (H) and In t kr-prtorand the other a -4- ' ' ; tntput in rcnt, are cultivating N .sFiihire 1, their respective ' ; ' . "*;J and BDEJ (drawn as freachI il:ln of L, the correspond- St................' ihigh as its counterpart on m rket, the marginal cost of '5 is int'11V at the going wage w ;*o figiure 1). If both agents --urn' ,n- I ; iC iii'oj!eial cost with marginal t or. 'r pvjyilng a fixed rent2 will * .' * * upiper will employ only L ' ! i 7Iwillw' grow greater as the ALTERNATIVE THEORIES OF SHARECROPPING 319 Product Figure 1. Labour A F 0 1L L J O L--Labcor -- landlord's share of gross output increases (which corresponds to BDEJ rotating downwards about J). The respective levels of gross output are OAFLO and OAGLs. In the latter case, ABDG accrues to the landlord, and the sharecropper's income net of wages (actual or imputed) is BCD. Producer surplus is lower on the sharecropped holding by an amount DFG, which is a measure of the welfare loss attributable to the inefficiency arising out of that contract.3 According to this line of analysis, then, the enforcement of legislation which reduces the share appropriated by landlords will improve efficiency, raise tenants' in- comes and secure greater equity between landlords and tenants. If stronger (first-best) medicine can be administered, then sharecropping contracts should be prohibited and fixed rents left to find their competitive levels. In the above analysis, the area of land cultivated by both agents was taken as given, so let us now turn our attention to the demand for sharecropping leases which specify r alone. The tenant maximises income (net of actual and/or imputed labour costs): Y=(1-r)Q-wL (1) where Q=F(H, L). Then the first order conditions are: aF (1- r).A= 0 (2) and aF (1-r)= w (3) Equation (3) is familiar; in Figure 1, it takes the guise of BDE intersecting CDR at D to determine L'. But equation (2) is a cause for disquliet. If the production function does not admit of a zero marginal 320 JOURNAL OF DVFVLOPMENT STUDIES productivity of land for finite H and L, there will be excess demand for tenancies whatever the rental share-provided it is less than unity-and each landlord will be able to act as a monopolist. Even if the production function were so accommodating, the tendency noted above for sharecroppers to undersupply variable inputs for any given area they lease in finds its obverse in their attempts to go on hiring in land until its marginal product falls to zero.
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