Private Property Rights and Sharecropping

Abstract

The purpose of this study is to derive a theory of share tenancy with which to explore the nature of resource allocation under one of the main forms of land tenure in agriculture. Share tenancy is a land lease under which rent is a contracted percentage of the output yield from the tenant per period of time. As a rule, the landowner provides land, and the tenant provides labor; other inputs may be provided by either party. Share tenancy (or sharecropping) is thus share contracting, defined here as two or more individual parties combining privately owned resources for the production of certain mutually agreed outputs, the actual outputs to be shared according to certain mutually accepted percentages as returns to the contracting parties for their productive resources forsaken. The theory, to be derived from standard economic principles, may be generalized to all forms of land tenure under similar ownership of resources. The prevailing impression is that sharecropping results in inefficient allocation of resources.' It will be shown here that the inefficiency argument is illusory. The implied resource allocation under private property rights is the same whether the landowner cultivates the land himself, hires farmhands to do the tilling, leases his holdings on a fixed rent basis,