ABSTRACT
At least since Adam Smith, economists have been intrigued by share contracts. There has been a proliferation of models, most of which tend to explain the share contract as resulting from some mix of optimal riskbearing and optimal effort motivation.2 A large number of researchers have attempted to test these models empirically. Sharecropping contracts, not surprisingly, are the most intensively examined (see the bibliography in Knoeber 2000), but similar studies have been conducted in many other areas. For example, Martin (1988) and Lafontaine (1992) examine franchise arrangements, Hallagan (1978) investigates contracts used to lease gold claims, Leffler and Rucker (1991) analyze a sample of private timber sale contracts, Goldberg and Erickson (1987) study long-term contracts for the sale of petroleum coke, Aggarwal and Samwick (1999) investigate incentive contracts between firms and their executives, and Chisholm (1997), Goldberg (1997), and Weinstein (1998) all examine profit-sharing contracts between film companies and “the talent.”
