Tuesday, 19 June 2007
"Contract Duration and Investment Incentives: Evidence from Land Tenancy Agreements" forthcoming JEEA, September 2007
A paper by Oriana Bandiera titled "Contract Duration and Investment Incentives: Evidence from Land Tenancy Agreements" is forthcoming in Journal of the European Economic Association in the September 2007 issue. The paper analyses the empirical determinants of contract length, a key and yet neglected dimension of contractual structure. The author estimates contract length and contract type jointly using original data on tenancy agreements signed between 1870 and 1880 in the district of Siracusa, Italy. The findings indicate that the choice of contract length is driven by the need to provide incentives for non observable investment, taking into account transaction costs and imperfections in the credit markets that make incentive provision costly. The results also illustrate that since both length and the compensation scheme are used to provide incentives within the same contract, joint analysis is important for a correct interpretation of the evidence.