AbstractThis paper discusses comparative efficiency of resource allocation under alternative forms of land tenure—sharecropping, fixed rental, wage cultivation, and owner cultivation. It shows that when transaction costs, the role of entrepreneurship, and economic incentives are explicitly introduced and analyzed within the framework of intersectoral interactions and linkages, land reform measures redistributing land to the peasants, substituting owner‐cultivators for share tenants, tend to improve agricultural production efficiency, resource allocation between farm and other sectors, and contribute to economic development of less developed countries, contrary to conclusions reached by writers of the “equal efficiency” school.