Does Sharecropping Affect Long-term Investment? Evidence from West Bengal's Tenancy Reforms

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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 2,000 owner-cum-tenants, point toward enormous excess demand for land rental and suggest that a continued inefficiency of sharecropping is exacerbated by strong disincentives to investment in soil fertility and irrigation. These reduce profits by at least 20%, making schemes to pay out landlord interests economically and financially viable.

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