# **4. Econometric results**

Controlling for unobserved household characteristics allows us to quantify impacts of share tenancy and compare them to the literature. With a 20% difference in net revenue between owned and sharecropped plots, the size of the Marshallian inefficiency estimated here is high relative to what is found by other studies. Input use is also significantly lower on barga plots, though the size of the effect varies depending among others on the ability to observe inputs. We also find evidence of a negative investment effect, the estimated magnitude of which ranges between 26% for soil conservation and 7% for private irrigation. Combining these implies a conservative estimate of tenancy-induced productivity losses of about 25%.

# **4.1 Cross-sectional evidence from listing data**

As descriptive data point towards differences in observables between owner-cum tenants and others, checking for potential differences in unobservable attributes that may set this group aside and possibly compromise the external validity of results from our plot-level analysis is needed. To do so and at the same time obtain a proxy of overall effects of share tenancy on output and investment, we use listing data to run cross-sectional regressions for all 40,000 agricultural cultivators. Two specifications are used, one with a zero-one indicator each for pure tenants and owner-cum tenants and one with the share of tenanted land in a household’s total cropped area as independent variables on the right hand side.

Results for output from production in the current period (columns 1-4 of table 5) suggest that, irrespective of whether gross or net revenue is used as a dependent variable, tenancy has a statistically significant and economically meaningful impact on productivity. The point estimate for the magnitude of the ‘Marshallian inefficiency’ for pure tenants is close to 20% in both cases. At the same time, with estimates of 11% and 14%, the coefficient for owner-cum tenants is significantly smaller (col. 1 and col. 3); in fact we can reject the hypothesis of the two coefficients being equal at the 5% level of significance. This implies that pure tenants are less efficient than owner cum tenants, possibly because owner-cum tenants’ owned plots will not be subject to Marshallian inefficiency. Including the share of land tenanted directly on the right hand side supports this; estimates suggest that gross and net revenue for pure tenants will be lower by 20% or 23% than that of full owners, in line with what theory would lead us to expect.

Although the level of investment in the sample is low overall, equivalent regressions on a zero/one indicator of whether any investment was undertaken since the household was established support the notion of significantly lower investment on tenanted as compared to owned plots. The coefficient for pure tenants, though small quantitatively, is marginally significant and negative. There is no evidence of investment being significantly lower for owner-cum tenants; to the contrary, the point estimate is positive, possibly because this group faces little obstacles to invest on owned plots. A similar result emerges if we 11