Itfollowsthattomaximizehisinefromlandsubjecttothelegalconstraintofrentalsharereduction,(a)theownercansuccessfullyinducethetenanttomitmorefarminginputsaslongasthetenantreceivesafarminginegreaterthanhisalternativeearning(sinceotherpotentialtenantswilloffertodoso);and(b)providedthatcondition(a)holds,thelandownerwillinducemoreintensivefarmingaslongasthemarginalreturntoadditionaltenantinputsisgreaterthanzero,(a),wehavethenon-landcostconstraint;in(b),wehavethelimitofthephysicalconstraint,namely,,simplydefinedhereasanincreaseinf/h,theamountofnonlandfarminginputs(ornonlandfarmingcost,f),.(1)Aftertheimpositionof

,assumethatthereisnopensating(offsetting),theowner'sinefromlandisconfinedstrictlytooftheannualyield.(2)Foranalyticalconvenience,(3),—,,whilepetitioninducesmoretenantinputsoverthegivenland,,,;/hisarectangularhyperbola,representingthecontractuallystipulated(fixed)costoftenantinputs,f,dividedbythelandholding,,

associatedwiththeconstanttenantinputs,therentperunitofland,(q-f)/h,,where(q-f)/hisatamaximum,andtheopenmarketrentalpercentageequalsar/

,however,the(q-f)/,(q-f)/h,theownerwillnowmaximize(q/h)

subjecttotheconstraintoff/,supposetheinitialrentalpercentageof70percent(ar/ap)'sshareconstraintisthusrepresentedbythecurve

,,regardlessofwhethertheinitialcontractisforfixedorsharerent.[1],therentperunitoflandwillnowbeaeinsteadofar,andthetenant'sinewillbeattimesoa,(q/h)

,thelandownercanreducethetenant'slandholdingtoobwithoutreducingtenantinputs,subjecttothenonlandcostconstraint,f//hasshown,petitiveequilibriumisreachedatpointh,wherethetenantinefromfarmingequalsthetenant(nonland),,thelandownercanparcelittoothertenantsinasimilarmanner,cultivateithimself,orhirelaborerstotillit(thislastpossibilitywasrestrictedinTaiwan).Theresult,underthestrictlyenforcedshareconstraint,isaresourcereallocationtoahigherf/hratiointenantfarms,/,land,h,andtenantlabor,,totalnonlandfarmingcost,f,istheprevailingwage,W,,givenW,anincreaseinf/hmeansanincreaseint/h.AttheinitiallandsizedivisionT1,themarginalproductofland,

,/hratioassociatedwithlandholdingobaftertheadjustment,,,,,ifthetenantwagerateislowenoughtoformf*/h(dottedlineinfig.6),andgiventheconstraintsandassumptionsspecified,,thelandownerwillreducelandsizetooc,where(q/h)

isatamaximumandwherethemarginalproductoftenantlabor(the"other"factor)willbezero.[2]Thetenantwillthenbereceivingaresidualine(whichequalsijtimesoc),anamountwhichthelandownercouldextractinalumpsum(apensatingpaymentwhichweassumeaway).