Does Sharecropping Affect Productivity and Long-Term Investment? Evidence from West Bengal’s Tenancy Reforms

Although transfer of agricultural land
ownership through land reform had positive impacts on
productivity, investment, and political empowerment in many
cases, institutional arrangements in West Bengal -- which
made tenancy heritable and imposed a prohibition on
subleasing -- imply that early land reform benefits may not
be sustained and gains from this policy remain well below
potential. Data from a listing of 96,000 households in 200
villages, complemented by a detailed survey of 1,800
owner-cum tenants, point toward binding policy constraints
and large contemporaneous inefficiency of share tenancy that
is exacerbated by strong disincentives to investment. A
conservative estimate puts the efficiency losses from such
arrangements in any period at 25 percent.