Turnover or Cash? Sharecropping in the Us South.
Abstract: Between 1880 and 1940, US post offices alleviated the isolation of the Southern countryside by posting information about jobs in the growing industrial sector. Hence, post offices enhanced the outside options of employees in a time employers in the farming sector used sharecropping - a contract where employers paid employees with a share of the harvested crop - to avoid labor turnover costs. This paper finds that a new post office in a county decreased sharecropping, which is evidence that sharecropping mostly resulted from the lack of outside options for employees. This is an innovative result in the share contract literature, usually more concerned about sector-level reasons such as labor turnover than about outside options. Furthermore, new light is shed on the current use of sharecropping and other share contracts such as franchising. Since sharecropping and franchising are a form of entrepreneurship, this paper suggests a reason for the negative relation between GDP per capita and entrepreneurship.