Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD) LSE RSS Contact Us YouTube Twitter

Abstract:

Development Economics Paper
On the Structure of Tenancy contracts: Theory and Evidence fron 19th Century Rural Sicily
Oriana Bandiera
January 2000
Paper No' DEDPS 19:
Full Paper (pdf)

Tags: contract duration; incentives; tenancy agreements.

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.