Leasehold estate

About: Leasehold estate is a research topic. Over the lifetime, 1589 publications have been published within this topic receiving 21480 citations. The topic is also known as: leasehold & tenancy.

A Marshallian model of share tenancy

Abstract: Despite persistent empirical support for the Marshallian model of share tenancy it remains out of favour at the theoretical level. There appear to be two reasons for this: Firstly, earlier attempts at theorizing an endogenous share rent under Marshallian assumptions implied that either the marginal product of land would have to be zero everywhere or that a competitive share rent equilibrium would fail to exist. The second objection to the Marshallian approach has been its failure to explain why inefficient Marshallian type contracts should survive under competitive conditions. The aim of this paper is to develop a simple Marshallian model in which the share rent is endogenous and which is free from these objections. It is argued that an explanation for the persistence of ‘inefficient’ sharecropping may be that it allows landlords to appropriate a portion of tenant surpluses even though landlords have no individual market power. Moreover, it is shown that (for a suitable set of parameters) the inefficient share rent equilibrium would survive competition from ‘efficient’ contracts. The work of Cheung (1968), (1969) has inspired a revival of interest in agricultural tenancy among economists from which two broad approaches to the theorisation of share tenancy have emerged. The first is the traditional or Marshallian one in which tenant choice with respect to both the quantity of land leased and to the application of labour and other non­ land inputs is unrestricted. This leads to the proposition that sharecropping is likely to be inefficient as compared with either owner production or fixed rent tenancy because the share rent has the effect of a tax which distorts the allocation of resources between land which is and is not sharecropped. The other view, pioneered by Cheung, may be termed the ‘contracts’ or ‘monitoring’ approach in which it is supposed that landlords can and will stipulate tenancy agreements with both land and non-land inputs set at efficient levels. Hence, in the absence of other offsetting advantages, competition among landlords and tenants would eliminate any inefficient Marshallian contracts and only efficient contracts would be observed. There is a persistent trickle of evidence pointing in the direction of the Marshallian position. For example, Bell (1977) concluded that ‘the predictions of the Marshallian view are generally in accord with the facts’ or more recently Shaban (1987), whose evidence indicates ‘a strong rejection of the monitoring approach’. Despite this, the Marshallian approach remains distinctly out of favour at the theoretical level. However, Bell (1977) also identified a reason for the unpopularity of the traditional approach in observing that ‘it cannot be said that the analytical foundations of the Marshallian position inspire much confidence’. The principal aim of this paper is to shift this perception by suggesting a way of theorizing a competitive share rent market which is free from the objections to the Marshallian approach alluded to by Bell. The theoretical difficulties associated with the Marshallian approach arise because, for the sharecropping tenant, the marginal cost of land appears to be zero — hence the tenant will wish to lease in land up to the point where its marginal product is also zero. This has led to the belief that either, in equilibrium, the overall marginal product of land must be zero, which is regarded as implausible in locations such as parts of India where sharecropping is widely observed or that the Marshallian model must result in a persistent excess demand for land and hence a competitive share rent equilibrium may not exist, see e.g. Newbery (1975). In fact, theorising an endogenously determined share rent under competitive market conditions, when agents satisfy Marshallian assumptions, i.e. tenants are free to choose the cultivation intensity and to lease from more than one landlord, has proved curiously intractable. The most notable attempt has been Bhardan and Srinivasan (1971) but their model is widely regarded as unsatisfactory precisely because it implies that under a share tenancy equilibrium the marginal product of land must be zero everywhere.1 A further objection to the standard Marshallian approach centres on its failure to identify an economic rationale for share tenancy. For a long time it was widely believed that the productive inefficiency of sharecropping could be offset by its superiority in terms of risk sharing but Stigliz (1974) and Newbery (1977) have shown that sharecropping has no risk Bell and Zusman (1976) provide a Marshallian model with an endogenous share rent but in the context of a market structure which is not strictly competitive. sharing advantages over a fixed rent and wage system. Few other offsetting advantages have been seriously proposed.2 Here it is suggested that a competitive share rent market can be theorised in a way which meets these objections to the Marshallian approach. In particular, it is shown that under the competitive share rent system developed below landlords may be able to appropriate a share of the ‘surplus’ which would accrue to tenants under a fixed rent system because tenants own non-marketed family resources. This provides a ‘rationale’ for the existence and persistence of ‘inefficient’ share tenancy. The idea that sharecropping is a means of appropriating surplus is, of course, not new; however, what is novel here is the demonstration that appropriation can occur even though individual landlords have no market power. Moreover, it is shown that while the familiar Marshallian property of a zero marginal product of land holds for leased out land this is consistent with an overall positive marginal product of land and a zero excess demand for tenancies. The paper is arranged as follows: Section 1 outlines the main assumptions of the model i.e. technology, existence of markets etc. Section 2 characterizes the fixed rent equilibrium while Section 3 suggests a way of characterizing a competitive share rent equilibrium. Section 4 provides a comparison of the two equilibria in which it is shown that share tenancy may in some circumstances provide landlords with sufficiently higher rental incomes to offset the efficiency disadvantages of sharecropping. Finally, Section 5 considers the question of the stability of the share rent equilibrium given that it is production inefficient and hence potentially vulnerable to erosion by efficient contracts. 1 THE MODEL There are two classes of household — landlords who own all the available land according to an exogenously given distribution and tenants who are landless.3 Both types of household own exogenously given quantities of non-land factors of production such as household labour, draught animals etc. However, it is supposed that the only organised market 2 Basu (1989) claims that limited tenant liability in the event of poor harvests may encourage excessively risky production plans. This distortion of a fixed rent system would be prevented by the adoption of share tenancy. The possibility that tenants may also be landowners is ignored here. yi = Gi (Hi Hi) i 1 ... M (Landlords) (1) yj = fj (hj) j = 1 ... N (Tenants) (2) where non-traded inputs have been suppressed, yj and yj are quantities of homogeneous output, Hj is the landlord’s endowment of land, Hj is the quantity of land leased out by the ith / landlord and hj is the quantity of land leased in by the jth tenant. It is assumed that f. > O, / ft / / G. > 0 , f . < 0 and G . < 0. Also, it is assumed that the extensive character of agricultural i i J production and the fixity of non-land inputs ensures that the marginal product of land on tenant farms becomes zero at finite (and possibly quite small) levels of land leased in ie. for all i and / for some finite hi, f. (hi) = 0. l Although landlord and tenant production functions are characterized as being different this is not necessary for any of the subsequent results but is convenient for expositional purposes. It is also convenient, but somewhat less innocuous, to assume that tenants are in fact identical i.e. fj (hj) = f(h) and similarly landlords i.e. Gj (Hi Hj) = G(H H). Finally, it is assumed that there is no uncertainty. This together with the fact that each household’s labour supply is fixed, means that all households will seek to maximize income subject to the market constraints they perceive. Thus, landlords will choose their leasing policy so as to maximize the sum of own output and rental income, while tenants will seek to maximize output less rent. 2 A COMPETITIVE FIXED RENT EQUILIBRIUM It is assumed that there are sufficiently large numbers of both landlords, M, and tenants, N, for the existence of a standard competitive market in land services. Landlord and tenant maximization then yields the conditions

A New Image of the Slave Auction: An Empirical Look at the Role of Law in Slave Sales and a Conceptual Reevaluation of the Nature of Slave Property

Abstract: This legal history article presents a new understanding of the nature of slave property. Slave property was divided and fragmented into many different interests including those with application to real property such life estates, remainders, shifting and spring interests, and leasehold interests. With regard to these interests, the article overlays the first-year, law-school property course onto slaves as property. Property interests in slaves were also divided by credit mechanisms including mortgages and secured credit transactions. Warranties are another example of divided property interests in slaves.The fragmented, Hohfeldian nature of slave property distributed the stake that southerners had in the institution of slavery.The article also places this new image of slave property onto the steps of courthouses. Court-ordered and court-supervised sales offered bargain opportunities for southerners to purchase slaves, thereby further extending the investment of southern society in slave property. This article builds upon the author’s earlier findings that a majority of slave auctions in South Carolina were conducted by the courts and that when courts sold slaves, the risk of family separation was higher than when private sellers conducted the sales. The data for this article and the previous study were drawn from antebellum primary sources including trial-court records, the salesbooks of sheriffs, and records of masters in chancery.Presented at Symposium entitled "Bondage, Freedom, and the Constitution: The New Slavery Scholarship and its Impact on Law and Legal Historiography, February 1994