I am reading "Development Economics" by Debraj Ray. I need to understand the different kinds of contracts in the land market.
Chapter 12.3.1 explains the contract forms. The general equation is: $ R = \alpha Y + F $
Where $R$ is the total rental that the tenant pays to the landlord.
The tenant can give to the landlord a share of the output. $Y$ denotes agricultural output on the rented land, $\alpha$ is the share of the output that the tenant gives to the landlord. And/or the tenant can give a fixed rent, $F$ to the landlord.
If $\alpha=0$ and $F>0$, this is a fixed-rent contract with rent $F$. The tenant keeps all the output, but pays a rent. I understand that.
If $0 < \alpha < 1$ and $F=0$, then this is a sharecropping contract. The tenant doesn't pay any rent, but gives a fraction of the output to the landlord. I understand that.
If $\alpha=0$ and $F<0$, this can be interpreted as a "pure wage contract" where the wage is simply $w = − F$: the tenant is not a tenant at all, but a laborer on the landlord’s land.
I don't understand that. The tenant keeps all the output, and in addition he receives a salary from the landlord? Shouldn't it be $\alpha=1$, so that the tenant gives all the output to the landlord and receives a salary, instead of $\alpha=0$?
The same thing is replicated in slide 9 here.
What am I missing?
