Landlords, tenants and technological innovations

Abstract

There is a long-standing belief that landlords and capitalists have used their control over the means of production to direct the development and adoption of technologies which have increased their welfare at the expense of workers. There is also a wide-spread belief that the interlinkage between credit and tenancy markets, which seems so prevalent in LDCs, provides further impetus to the resistance of innovations: innovations which make tenants better off reduce their demand for loans, and thus make landlords (qua creditors) worse-off. These contentions have typically been dismissed out of hand by standard welfare economics arguments. The rural environment of most LDCs may not, however, be adequately described by the standard economic model on which this welfare analysis is based. In particular, in many LDCs sharecropping contracts are widely employed; there is evidence of widespread unemployment, and there is not the full set of (risk and capital) markets required by the competitive paradigm. The objective of this paper is to show under quite general conditions that the institutional structure of the economy may indeed be an important determinant of whether a particular innovation will or will not be adopted. We show that: 1. (i) landlords may wish to — and can — resist innovations which unambiguously increase production whenever sharecropping contracts are employed, 2. (ii) conversely, landlords may adopt innovations which not only lower the welfare of workers, but even lower net national product, 3. (iii) the presence of interlinkage may, indeed, affect the adoption of a new technology; however, the reason for this is only partly related to the effect of innovations on tenants' borrowing. Indeed, we show that innovations may increase as well as decrease the tenants' demand for borrowing.