So this has been a problem for quite some time. When I play split-screen with a friend, whoever plays Player Two is basically an in-game ghost. Player Two can "mine" things but can't collect anything. The block will just disappear. If you drop some things in front of them they can pick it up but otherwise cannot interact with it, i.e. if you dropped some wood blocks they could not make a crafting table, planks, etc. If you give them a crafting table they cannot make anything. Even if you drop them all the stuff.

Another thing of note is if Player Two cuts down a tree (and gets nothing) the tree will still be there on Player One's screen. The only things that Player Two can interact with are grass and flowers. Player Two would not be able to collect seeds or flowers but Player One could pick those up. 

We've done this on Xbox One (split-screen) and switch (trying to join world) but it doesn't change the outcome that Player Two is a ghost.