A general equilibrium model is presented wherein wage labor requires monitoring in order to extract effort. Landlords may also elect to adopt sharetenancy contracts in which workers have an incentive to supply unsupervised effort. Two "distortions" exist: monitoring costs in one sector and a share "tax" in the other. Efficiency statements require second-best comparisons adopting more specific functional forms. This mixed wage-sharetenancy economy is technically efficient and provides greater Benthamite social welfare than a wage-only economy, when private incentives lead to mixing. The incidence of sharetenancy is hypothesized to increase with monitoring costs, density of tenants per landlord, and labor intensity of production.

A general equilibrium model is presented wherein wage labor requires monitoring in order to extract effort. Landlords may also elect to adopt sharetenancy contracts in which workers have an incentive to supply unsupervised effort. Two "distortions" exist: monitoring costs in one sector and a share "tax" in the other. Efficiency statements require second-best comparisons adopting more specific functional forms. This mixed wage-sharetenancy economy is technically efficient and provides greater Benthamite social welfare than a wage-only economy, when private incentives lead to mixing. The incidence of sharetenancy is hypothesized to increase with monitoring costs, density of tenants per landlord, and labor intensity of production.