Reverse-Share-Tenancy and Agricultural Efficiency: Farm-Level Evidence from Ethiopia

Using a unique tenant-landlord matched dataset from the Tigray region of Ethiopia, we are able to show how the tenants' strategic response to the varying economic and tenure-security status of the landlords helps explain sharecroppers' productivity differentials. The study reveals that sharecroppers' yields are significantly lower on plots leased from landlords who are non-kin and landlords with weaker economic and tenure-security status (such as female) than on plots leased from landlords with the contrasting characteristics. While, on aggregate, the results show no significant efficiency loss on kin-operated sharecropped plots, more decomposed analyses indicate strong evidence of Marshallian inefficiency on kin-operated plots leased from landlords with weaker bargaining power and higher tenure insecurity. This study thus shows how failure to control for the heterogeneity of landowners' characteristics can explain the lack of clarity in the existing empirical literature on the extent of moral hazard problems in sharecropping contracts.