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On the structure of tenancy contracts: theory and evidence from 19th century rural Sicily

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  • Bandiera, Oriana
Abstract
This paper analyses the empirical determinants of contract length, a key and yet neglected dimension of contractual structure. I use data on tenancy agreements signed between 1870 and 1880 in the district of Siracusa, Italy to estimate the choice over length and compensation schemes jointly. The findings indicate that the choice of contract length is driven by the need to provide incentives for non-observable investment, taking into account transaction costs and imperfections in the credit markets that make incentive provision costly. The results also illustrate that since both length and the compensation scheme are used to provide incentives within the same contract, joint analysis is important for a correct interpretation of the evidence.

Suggested Citation

  • Bandiera, Oriana, 2000. "On the structure of tenancy contracts: theory and evidence from 19th century rural Sicily," LSE Research Online Documents on Economics 3546, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:3546
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    References listed on IDEAS

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    Cited by:

    1. Bandiera, Oriana, 2002. "Land distribution, incentives and the choice of production techniques in Nicaragua," LSE Research Online Documents on Economics 3545, London School of Economics and Political Science, LSE Library.
    2. Abhijit V. Banerjee & Paul J. Gertler & Maitreesh Ghatak, 2002. "Empowerment and Efficiency: Tenancy Reform in West Bengal," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 239-280, April.
    3. Kai-Uwe Kuhn & Francine Lafontaine & Ying Fan, 2013. "Financial Constraints and Franchising Decisions," 2013 Meeting Papers 933, Society for Economic Dynamics.
    4. Ying Fan & Kai-Uwe Kühn & Francine Lafontaine, 2017. "Financial Constraints and Moral Hazard: The Case of Franchising," Journal of Political Economy, University of Chicago Press, vol. 125(6), pages 2082-2125.
    5. Jaideep Roy & Konstantinos Serfes, 2000. "Strategic Choice of Contract Lengths in Agriculture," Department of Economics Working Papers 00-03, Stony Brook University, Department of Economics.
    6. Pierre-André Chiappori & Bernard Salanié, 2002. "Testing Contract Theory : A Survey of Some Recent Work," Working Papers 2002-11, Center for Research in Economics and Statistics.
    7. Hooper, Louise, 2008. "Paying for performance: Uncertainty, asymmetric information and the payment model," Research in Transportation Economics, Elsevier, vol. 22(1), pages 157-163, January.

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    More about this item

    Keywords

    contract duration; incentives; tenancy agreements.;
    All these keywords.

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment

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