Credit and sharecropping in agrarian societies

A model of linkage between land, labor and credit transactions in the context of sharecropping is considered. It is shown that regardless of the presence or absence of linkage or any other control by the landlord, as long as he can vary the size of the plot given to a tenant and there are enough potential tenants, in equilibrium contracts a tenant's utility under sharecropping will be the same as that which he could have obtained as a full-time wage laborer. This result has the fundamental implication that policies other than land reform will not affect the welfare of tenants. Government subsidization of tenant's credit results only in the subsidization of landlords. Other partial reforms by the government, however, may force the landlord to link credit and tenancy contracts even if the government provides the cheaper source of credits. This, while leaving the tenant's utility unaltered at its pre-reform level, will affect total output and the extent of tenancy.