The Marshallian theory of sharecropping argues that sharecropping leads to Pareto-inefficient allocation of labor because sharecroppers are only paid a percentage, rather than all of their marginal product of labor, and consequently, would rationally reduce their work effort. However, between 1880 and 1910, the percentage of rented and sharecropped farms rose sharply. Why then, would the percentage of sharecroppers increase if it were deemed Pareto-inefficient? By analyzing Martin Garrett and Zhenhui Xu’s paper “The Efficiency of Sharecropping: Evidence from the Postbellum South,” and Joseph Reid’s paper “Sharecropping as an Understandable Market Response: The Post-Bellum South,” I will examine both agricultural theory and empirical data
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The results find that a significant correlation does not exist between labor-land and draft animals-land ratios and the percentage of sharecroppers. The values of correlation are negative and low and the values of R2 are low as well, therefore “we must conclude that [the] data [does] not reveal any evidence to support the Marshallian theory of less-than-adequate employment under sharecropping.”The empirical model adequately explains the contribution of each of the variables to the dollar value of output, and supports the hypothesis that given the economic situation and institutional arrangement after the Civil war, “sharecropping in the post-bellum South was desirable because sharecropped farms could be more productive than owner-operated farms and perhaps more productive than rented farms.” Among the three output elasticities of labor, the output elasticity of sharecroppers is …show more content…
Firstly is the issue of assessing the quality of capital among different forms of tenure systems. In the study, capital is limited to only draft-animals (oxen and mules) and there is potential for owners to raise better draft-animals than renters and croppers. Owners are presumably more invested in their land and quality of their capital than the renters and croppers, as they are critical to agricultural productivity and return. As a result, this could produce misleading results regarding the quality and elasticity of the inputs, and consequently, agricultural output. To be able to control for this in the regression function would produce more refined and accurate results regarding total factor productivity and agricultural output. Secondly, output, the dependent variable, was measured by the dollar value of agricultural output by county, but the paper does not necessarily address cash-crops (cotton) versus other crops (i.e. corn) and its effect on dollar value of output. In this case, the dollar value of output rises as cotton production increases, and as a result, the output elasticity determined by the model may be overestimated. As cotton production rises, we assume that the number of cotton acres will also rise. As such, by comparing the ratio of cotton-acres to improved acres in each county, we would be able to
The results find that a significant correlation does not exist between labor-land and draft animals-land ratios and the percentage of sharecroppers. The values of correlation are negative and low and the values of R2 are low as well, therefore “we must conclude that [the] data [does] not reveal any evidence to support the Marshallian theory of less-than-adequate employment under sharecropping.”The empirical model adequately explains the contribution of each of the variables to the dollar value of output, and supports the hypothesis that given the economic situation and institutional arrangement after the Civil war, “sharecropping in the post-bellum South was desirable because sharecropped farms could be more productive than owner-operated farms and perhaps more productive than rented farms.” Among the three output elasticities of labor, the output elasticity of sharecroppers is …show more content…
Firstly is the issue of assessing the quality of capital among different forms of tenure systems. In the study, capital is limited to only draft-animals (oxen and mules) and there is potential for owners to raise better draft-animals than renters and croppers. Owners are presumably more invested in their land and quality of their capital than the renters and croppers, as they are critical to agricultural productivity and return. As a result, this could produce misleading results regarding the quality and elasticity of the inputs, and consequently, agricultural output. To be able to control for this in the regression function would produce more refined and accurate results regarding total factor productivity and agricultural output. Secondly, output, the dependent variable, was measured by the dollar value of agricultural output by county, but the paper does not necessarily address cash-crops (cotton) versus other crops (i.e. corn) and its effect on dollar value of output. In this case, the dollar value of output rises as cotton production increases, and as a result, the output elasticity determined by the model may be overestimated. As cotton production rises, we assume that the number of cotton acres will also rise. As such, by comparing the ratio of cotton-acres to improved acres in each county, we would be able to