Iamalsoindebtedtothreesourcesforfinancialaid:totheLillyEndowmentIncorporatedgrantsupportingthestudyofpropertyrightsandbehavioratUCLA,totheUniversityofChicago,fortheirPost-DoctoralFellowshipinPoliticalEconomyfortheacademicyear1967-68，andtotheFordFoundationgrantforInternationalStudiesincludingAgriculturalEconomicsattheUniversityofChicago.
StevenNg-SheongCheung
Chicago,1968
1.Introduction
A.TheScope
Thisstudyconsistsoftwoparts.Thefirstpartderivesatheoryofsharetenancywithwhichtoexplorethenatureofresourceallocationunderoneofthemainformsoflandtenureinagriculture.Sharetenancyisalandleaseunderwhichtherentpaidbythetenantisacontractedpercentageoftheoutputyieldperperiodoftime.Asarule,thelandownerprovideslandandthetenantprovideslabor;otherinputsmaybeprovidedbyeitherparty.Sharetenancyisthussharecontracting,definedhereastwoormoreindividualpartiesbiningprivatelyownedresourcesfortheproductionofcertainmutuallyagreedoutputs,theactualoutputstobesharedaccordingtocertainmutuallyacceptedpercentagesasreturnstothecontractingpartiesfortheirproductiveresourcesforsaken.Thetheory,tobederivedfromstandardeconomicprinciples,maybegeneralizedtoallformsoflandtenureundersimilarownershipofresources.
Theprevailingimpressionisthatsharetenancyresultsininefficientallocationofresources.[1]Itwillbeshownhere,boththeoreticallyandempirically,thattheinefficiencyargumentisillusory.Theimpliedresourceallocationunderprivatepropertyrightsisthesamewhetherthelandownercultivatesthelandhimself,hiresfarmhandstodothetilling,leaseshisholdingsonafixedrentbasis,orsharestheactualyieldwithhistenant.Inotherwords,differentcontractualarrangementsdonotimplydifferentefficienciesofresourceuseaslongasthesearrangementsarethemselvesaspectsofprivatepropertyrights.ImplicationsofalternativetheorieswillbetestedagainstobservationsobtainedprimarilyfromAsianagriculture.
Itremainstoinquirefurtherintothechoiceofcontractsandvariousstipulationsoflandleases;andIshallattempttoshowthattheobservedleasingarrangementsareconsistentwiththetheoryofchoice.Theallocationofresourceswilldiffer,however,ifpropertyrightsareattenuatedordeniedasprivate,orifthegovernmentoverrulesthemarketprocessofallocation.InthesametheoreticalcontextIshallargue,inAppendixA,thatseveralhypothesesrelatingtodisguisedunemploymentandthedualeconomyareerroneous.Theirerrorisattributabletoneglectoftheflexibilityoflanduseandfailuretoconsiderthepertinentpropertylaws.
Thesecondpartofthisstudyappliesthetheoryofsharetenancytoasituationinwhichtherentalpercentageisrestrictedtoalegalmaximumbythegovernment.Twogeneralhypotheseswillbederived.Onerelatestopensatingpaymentsandtenurerearrangements,whichareoffsettingcontractualrearrange-mentsthatmayrenderthemaximumrentalpercentagecontrolimmaterial.Anotherhypothesis,relatingtoresourcereallocation,beessignificantonlyifpensatingpaymentsandtenurerearrangementsareeffectivelyprohibitedbylaw.Bythelaterhypothesis,thetheoryofsharetenancyimpliesincreasedfarmingintensityintenantfarmsiftherentalshareoftheannualyieldislegallyreduced.Variousimplicationsforresourcereallocationwillbetestedagainstobservations.Inparticular,evidencewillbepresentedtoconfirmthatundereffectiverentalsharereductionthemarginalproductoflandintenantfarmswillbehigher,andthemarginalproductsoftenantinputswillbelower,thanthoseofsimilarresourcesemployedelsewhere.
AlthoughsimilarrentalsharerestrictionshavebeenenactedinseveralAsiancountries,Taiwanhasbeenchosenforthesecondpartofthisstudy.Twoadvantagesmaybenoted.First,duringthefirstphaseoftheTaiwanlandreformprogram,therentalsharereductionwascarriedoutbeforeotherreformmeasureswereintroduced.[2]Thus,therewasaperiodofthreeyearsinwhichwecaninvestigatethereallocationofresourcesasaffectedbytherentalrestrictionindependentofotherfactors.Andsecond,inTaiwanboththeprovisionsoftherentalsharereductionandtheirenforcementarerestrictiveenoughtorevealsomeofthemajorimplicationsderivedfromthetheoryofsharetenancy.
[1].Classicaleconomistsaside,contemporarythesesonsharetenancywhichimplyinefficientresourceallocationinclude:RainerSchickele,"EffectofTenureSystemsonAgriculturalEfficiency,"JournalofFarmEconomics（February,1941）；EarlHeady,"EconomicsofFarmLeasingSystems,"JournalofFarmEconomics（August,1947）；EarlHeadyandEarlKehrberg,"RelationshipofCrop-ShareandCashLeasingSystemstoFarmingEfficiency,"ResearchBulletin（IowaStateCollegeAgriculturalExperimentStation,May,1952）；CharlesIssawi,"FarmOutputunderFixedRentsandShareTenancy,"LandEconomics（February,1957）；N.Georgescu-Roegen,"EconomicTheoryandAgrarianEconomics,"OxfordEconomicPapers（February,1960）；andAmartyaK.Sen,"PeasantsandDualismwithorwithoutSurplusLabor,"JournalofPoliticalEconomy（October,1960）.