Moral hazard, land fertility and contract choices in the Philippines

An important application of moral hazard models concerns land leasing contracts in agriculture like fixed rent contracts or sharecropping. in a Principal-Agent model with endogenous fertility evolution, the optimal contract results of a trade off between risk sharing, production incentives and land investment incentives. The empirical estimations made on Philippines data are consistent with the predictions of the model in terms of choice of incentives by landowners relative to the land value. The results remain robust to the endogeneity problem of choice of culture as well as the selection problem of contacts signed which is generally not dealt with in the share tenancy literature.