Economics of Cost‐Share Leases in Less‐developed Countries

Economists have long recognized that output‐share leases result in inefficiencies in variable resource use. Cost‐share leases have been suggested as a way of overcoming this inefficiency. Only in rare cases, however, has cost sharing become a part of share leasing in less‐developed countries. It is argued in this article that in less‐developed countries landowners generally make more net income by not adopting cost‐share leases. The societal loss due to output‐share leasing, and several policy alternatives, in addition to cost‐sharing, which might help resolve this inefficiency problem, are discussed.