Land Lease Market Research Articles

Household Resources, Transaction Costs, and Adjustment through Land Tenancy

This paper examines the role of household endowments of imperfectly tradeable factors of production (e.g., male, female, child labor, and draft animals) on land leasing. An explicit attempt is made to account and test for the role of transaction costs on the incidence and extent of adjustment taking place through the land lease market. The econometric model is implemented using pooled data from six villages in the semiarid region of India. The results confirm the significant role of nontradeable family endowments and indicate the presence of frictions in the land tenancy market.

Agricultural Development and Land Tenancy in a Peasant Economy: Reply

It is by now well known, particularly due to Bell and Braverman, that a model with constant returns to scale, sharecropping, and the wage-contract choice leads to a tendency for corner solution. In Bardhan (1979) I introduced a two-season production process interlinking land and credit markets and landlord monopoly power, not to avoid-as Datta and Nugent seem to imply-the problem of corner solutions, but only to introduce a dosage of realism in the model. The main problem for interior solutions in the context of the model was caused by the special assumption of constant returns to scale, which I used here, unlike in Bardhan and Srinivasan and Bardhan (1977), primarily to avoid cluttering up the equations. In any case, in peasant agricultural production functions with only land and labor as arguments and other factors suppressed (particularly managerial and animal labor input), the assumption of constant returns to scale is not very realistic. If my 1979 model is taken with diminishing returns to scale, the interior solution and most of the comparative-static results are more robust. It is not inconsistent for the landlord to be a monopolist in the land-lease market and at the same time be a competitive buyer in the labor market. In fact, I think this may be the more realistic case. As indicated in footnote 3 of Bardhan (1979), the demand for labor by others has been suppressed for convenience in equation (9); but, if one likes, one may introduce on the left-hand side of that equation a term D(W2) to represent the net demand for labor by others (say, by pure owner-cultivators) with usual properties of demand functions. None of the subsequent results in Bardhan (1979) changes. As far as I can see the empirical result reported in table 1 by Datta and Nugent on the basis of a normalized dependent variable is illegitimate. They combine the proportion of cultivated area under total tenancy given in Bardhan (1979) and the area under sharecropping as percentage of area under sharecropping and fixed-rental tenancy in Bardhan (1977) to get their normalized dependent variable, which is the percentage of land under share and wage contracts only. This they cannot do unless they use independent information on land under leasing arrangements other than share and fixed-rental tenancy, which in some states are significant.

Toward a More General Model of Land Tenancy and Reform: Comment

In a recent article A. Y. C. Koo [1973] sought to advance a more general theory of land tenancy and draw implications for land reform. While his contention that different models of share-tenancy (with conflicting efficiency properties) have different implications for land reform is correct, unfortunately, his mathematical analysis of oligopoly land market is both misleading and erroneous. It is misleading in the sense that it is not (as a close look at the model would verify) an oligopoly model of share-rental determination, which it purports to be. Thus, on this account, it is not really a critique of either Bardhan and Srinivasan [1971] or of Cheung [1974], which it claims to be.1 Rather it is an oligopoly model of determination of fixed-rental in the landlease market. If so, it loses much of its importance, at least empirically, since the fixed-rental system is of limited empirical significance. And the efficiency arguments for and against the share-rental lease, which he advances in the beginning, and also the land-reform question of reducing the share-rental become irrelevant for the analysis that follows. Second, even if we consider his mathematical argument on land renting on its own grounds, it is unfortunately marred by a mathematical flaw that prevails throughout his analysis and leads him to counterintuitive results. Section I gives a restatement of the Koo model and points to its errors and the resulting counterintuitive results. Section II reformulates the model in correct terms and shows how intuitively and empirically plausible results may be derived therefrom.