Land lease markets and agricultural efficiency: theory and evidence from Ethiopia
This paper develops a theoretical model of land leasing that includes transaction costs, risk pooling motives and non-tradable productive inputs. It investigates the empirical implications of land contracts using data collected from four villages in Ethiopia.The paper shows that sharecropping is the dominant contract if transaction costs are negligible, but that a rental contract may arise if transaction costs decrease with increasing the tenant’s share of output.