Self-Selection by Contractual Choice and the Theory of Sharecropping

There are definite patterns for the organization of production on agricultural land. Production of some crops tends to be organized via wage contracts, while land sown to other crops tends to be rented, and still other crops are frequently sharecropped. One popular explanation is that contractual choice in agriculture is related to the riskiness of production. Sharecropping, according to this argument, is used with the most risky crops to facilitate risk spreading in a world with incomplete insurance markets.