Land Tenancy and Non-contractible Investment in Rural Pakistan

Commitment failure lies at the core of incomplete contract theory, yet its quantitative significance has rarely been assessed. Using detailed plot-level data from rural Pakistan, we find that non-contractible investment is underprovided on tenanted land, even after controlling for the endogeneity of...

Full description

Bibliographic Details
Main Authors:	Jacoby, Hanan G., Mansuri, Ghazala
Format:	Journal Article
Language:	EN
Published:	2012
Subjects:	Economics of Contract: Theory D860 Land Ownership and Tenure Land Reform Land Use Irrigation Agriculture and Environment Q150 Housing Supply and Markets R310
Online Access:	http://hdl.handle.net/10986/5875

id	okr-10986-5875
recordtype	oai_dc
spelling	okr-10986-58752021-04-23T14:02:23Z Land Tenancy and Non-contractible Investment in Rural Pakistan Jacoby, Hanan G. Mansuri, Ghazala Economics of Contract: Theory D860 Land Ownership and Tenure Land Reform Land Use Irrigation Agriculture and Environment Q150 Housing Supply and Markets R310 Commitment failure lies at the core of incomplete contract theory, yet its quantitative significance has rarely been assessed. Using detailed plot-level data from rural Pakistan, we find that non-contractible investment is underprovided on tenanted land, even after controlling for the endogeneity of leasing decisions. Our evidence also indicates that moral hazard in investment effort alone cannot explain this inefficiency. Instead, imperfect commitment appears to be the driving mechanism, since even plots taken on fixed rent contracts where all the rent is paid upfront receive lower investment than owner-cultivated plots. We further show that a considerable portion of the variation in tenancy duration, and hence in the security of tenure, is due to heterogeneity across landlords. One interpretation of this finding is that landlord reputation is important in mitigating hold-up. 2012-03-30T07:34:58Z 2012-03-30T07:34:58Z 2008 Journal Article Review of Economic Studies 00346527 http://hdl.handle.net/10986/5875 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article Pakistan
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	EN
topic	Economics of Contract: Theory D860 Land Ownership and Tenure Land Reform Land Use Irrigation Agriculture and Environment Q150 Housing Supply and Markets R310
spellingShingle	Economics of Contract: Theory D860 Land Ownership and Tenure Land Reform Land Use Irrigation Agriculture and Environment Q150 Housing Supply and Markets R310 Jacoby, Hanan G. Mansuri, Ghazala Land Tenancy and Non-contractible Investment in Rural Pakistan
geographic_facet	Pakistan
relation	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description	Commitment failure lies at the core of incomplete contract theory, yet its quantitative significance has rarely been assessed. Using detailed plot-level data from rural Pakistan, we find that non-contractible investment is underprovided on tenanted land, even after controlling for the endogeneity of leasing decisions. Our evidence also indicates that moral hazard in investment effort alone cannot explain this inefficiency. Instead, imperfect commitment appears to be the driving mechanism, since even plots taken on fixed rent contracts where all the rent is paid upfront receive lower investment than owner-cultivated plots. We further show that a considerable portion of the variation in tenancy duration, and hence in the security of tenure, is due to heterogeneity across landlords. One interpretation of this finding is that landlord reputation is important in mitigating hold-up.
format	Journal Article
author	Jacoby, Hanan G. Mansuri, Ghazala
author_facet	Jacoby, Hanan G. Mansuri, Ghazala
author_sort	Jacoby, Hanan G.
title	Land Tenancy and Non-contractible Investment in Rural Pakistan
title_short	Land Tenancy and Non-contractible Investment in Rural Pakistan
title_full	Land Tenancy and Non-contractible Investment in Rural Pakistan
title_fullStr	Land Tenancy and Non-contractible Investment in Rural Pakistan
title_full_unstemmed	Land Tenancy and Non-contractible Investment in Rural Pakistan
title_sort	land tenancy and non-contractible investment in rural pakistan
publishDate	2012
url	http://hdl.handle.net/10986/5875
_version_	1764396623692038144

Land Tenancy and Non-contractible Investment in Rural Pakistan

Similar Items