Morning Knowledge /12. Development

Raising tenants' share in crop-sharing contracts between landlords and tenants in developing countries can boost agricultural output, by providing tenants with the right incentive to raise agriculture productivity. Bocconi University's Selim Gulesci and colleagues came to this conclusion making use of a field experiment in Uganda.

Fifty-fifty sharing agreements are indeed inefficient and raising tenants' share to 75% could raise the output by 60%, thanks to more investment and more risk-taking.

The scholars randomly divided 304 tenants, located in 237 villages, into three groups: one group maintained the 50-50 agreement, the second moved to 75-25 and a third group kept the 50-50 contract, but tenants were provided with some cash, in order to control whether any change in productivity was caused by an income effect.

The output of the 75-25 group was 60% higher than the 50-50 group, while the output of the third group was similar to the 50-50 group, thus confirming that the effect was due to the incentives introduced by the sharing rule. Furthermore, the hike in productivity neither came at the expense of other income-generating activities at household level, nor resulted in soil degradation.