demand and supply of infrequent payments as a commitment device evidence from kenya despite extensive evidence that preferences are often time inconsistent there is only scarce evidence of willingness to pay for commitment infrequent payments for frequently provided goods and services are a common feature of many markets and they may naturally provide commitment to save for lumpy expenses multiple experiments in the kenyan dairy sector show that i farmers are willing to incur sizable costs to receive infrequent payments as a commitment device ii poor contract enforcement however limits competition among buyers in the supply of infrequent payments we then present a model of demand and supply of infrequent payments and test its additional predictions

the economic theory of agrarian institutions introduction alternative approaches to the theory of institutions in economic development pranab bardhan rational peasants efficient institutions and a theory of rural organization methodological remarks for development economics joseph e stiglitz part 1 land and labour theories of sharecropping nirvikar singh a comparison of principal agent and bargaining solutions the case of tenancy contracts clive bell contracts with eviction in infinitely repeated principal agent relationships bhaskar dutta et al production relations in semi arid african agriculture hans binswanger et al part 2 credit and interlinked transactions rural credit markets the structure of interest rates exploitation and efficiency kaushik basu credit and agrarian class structure mukesh eswaran and ashok kotwal credit rationing tenancy productivity and the dynamics of inequality avishay braverman and joseph e stiglitz on choice among creditors and bonded labour contracts t n srinivasan some aspects of linked product and credit market contracts among risk neutral agents clive bell and t n srinivasan a note on interlinked rural economic arrangements pranab bardhan interlinkages and the pattern of competition debraj ray and kunal sengupta part 3 marketing and insurance agricultural institutions for insurance and stabilization david m newbery peasants risk aversion and the choice of marketing intermediaries and contracts a bargaining theory of equilibrium marketing contracts pinhas zusman part 4 co operatives technology and the state agricultural producer co operatives louis putterman institutional analysis of credit co operatives avishay braverman and j luis guasch agrarian structure technological innovations and the state alain de janvry et al

tracking the quality premium of certified coffee evidence from ethiopia summary certification of voluntary sustainability standards vss is rapidly increasing in global value chains while consumers mostly in developed countries are willing to pay significant premiums for the certification of such standards it is not well understood how effectively these incentives are transmitted to producing countries we study vss more in particular fair trade and organic certification in ethiopia s coffee sector the country s most important export commodity using a unique census of transaction data at the export level and large scale data at the production level we find that transmission of export quality premiums to coffee producers is limited with only less than one third of this premium being passed on and we find limited evidence of effects due to communal investments moreover as quality premiums are small and average production levels in these settings are low we estimate that these premiums would only lead to an increased income for coffee farmers of 22 usd per year even with a perfect transmission scenario and therefore would have little impact on the welfare of the average coffee farmer given that the vss studied are characterized by the highest premiums among vss schemes it can be assumed that even lower benefits from other vss certification schemes trickle down to producers

does competition encourage credit provision evidence from african trade credit relationships previous work has claimed that monopoly power facilitates the provision of credit because monopolists are better able to enforce payment here we argue that if relationship specific investments are required by borrowers to establish creditworthiness monopoly power may reduce credit provision because holdup problems ex post will deter borrowers from investing in establishing creditworthiness empirically we examine the relationship between monopoly power and credit provision using data on the supply relationships of firms in five african countries consistent with the up front investment story we find that monopoly power is negatively associated with credit provision and that this correlation is stronger in older supplier relationships because the data include several observations per firm we are able to utilize firm fixed effects thus netting out unobserved firm characteristics that may have been driving results in earlier studies

subjective performance measures in optimal incentive contracts objective measures of performance are seldom perfect in response incentive contracts often include important subjective components that mitigate incentive distortions caused by imperfect objective measures this paper explores the combined use of subjective and objective performance measures in respectively implicit and explicit incentive contracts naturally objective and subjective measures often are substitutes sometimes strikingly so we show that if objective measures are sufficiently close to perfect then no implicit contracts are feasible because the firm s fallback position after reneging on an implicit contract is too attractive we also show however that objective and subjective measures can reinforce each other if objective measures become more accurate then in some circumstances the optimal contract puts more weight on subjective measures because the improved objective measures increase the value of the ongoing relationship and so reduce the firm s incentive to renege we also analyze the use of subjective weights on objective performance measures and provide case study evidence consistent with our analyses

strategic default in the international coffee market this article studies strategic default on forward sale contracts in the international coffee market to test for strategic default we construct contract specific measures of unanticipated changes in market conditions by comparing spot prices at maturity with the relevant futures prices at the contracting date unanticipated rises in market prices increase defaults on fixed price contracts but not on price indexed ones we isolate strategic default by focusing on unanticipated rises at the time of delivery after production decisions are sunk and suppliers have been paid estimates suggest that roughly half of the observed defaults are strategic we model how strategic default introduces a trade off between insurance and counterparty risk relative to indexed contracts fixed price contracts insure against price swings but create incentives to default when market conditions change a model calibration suggests that the possibility of strategic default causes 15 8 average losses in output significant dispersion in the marginal product of capital and sizable negative externalities on supplying farmers

unemployment duration in the recession the local labour market area scale green a e 1985 unemployment duration in the recession the local labour market area scale reg studies 19 111 129 this paper examines spatial variations in the duration of uncompleted unemployment spells using median lower and upper quartile duration measures within a local labour market area llma framework regional hierarchical and functional differentials in unemployment duration during the recession are investigated using a nineteen fold llma classification it is discovered that pre existing spatial differentials in unemployment duration experience were largely maintained with longer durations recorded in the north than in the south around provincial conurbations than in the london metropolitan region at higher than at lower levels of the urban hierarchy and in llmas with a manufacturing employment base than in those with a service or commercially oriented employment structure

free entry and social inefficiency our goal is to provide a simple yet general exposition of the conditions under which the number of entrants in a free entry equilibrium is excessive insufficient or optimal our analysis compares the number of firms that enter a market when there is free entry with the number that would be desired by a social planner who is unable to control the behavior of firms once they are in the market that is we consider the second best problem of choosing the welfare maximizing number of firms while we take as given their noncompetitive behavior after entry we demonstrate that the crucial conditions for establishing the presence of an entry bias can be stated quite simply in terms of the outcome of the postentry game played by entrants in contrast to previous work we do not need to model this postentry game explicitly

in kind finance a theory of trade credit it is typically less profitable for an opportunistic borrower to divert inputs than to divert cash therefore suppliers may lend more liberally than banks this simple argument is at the core of our contract theoretic model of trade credit in competitive markets the model implies that trade credit and bank credit can be either complements or substitutes among other things the model explains why trade credit has short maturity why trade credit is more prevalent in less developed credit markets and why accounts payable of large unrated firms are more countercyclical than those of small firms

the impact of competition on management quality evidence from public hospitals in this paper we examine the causal impact of competition on management quality we analyze the hospital sector where geographic proximity is a key determinant of competition and english public hospitals where political competition can be used to construct instrumental variables for market structure since almost all major english hospitals are government run closing hospitals in areas where the governing party has a small majority is rare due to fear of electoral punishment we find that management quality measured using a new survey tool is strongly correlated with financial and clinical outcomes such as survival rates from emergency heart attack admissions ami more importantly we find that higher competition as indicated by a greater number of neighboring hospitals is positively correlated with increased management quality and this relationship strengthens when we instrument the number of local hospitals with local political competition adding another rival hospital increases the index of management quality by one third of a standard deviation and leads to a 10 7 reduction in heart attack mortality rates

management practices relational contracts and the decline of general motors abstract general motors was once regarded as the best managed and most successful firm in the world however between 1980 and 2009 gm s us market share fell from 46 to 20 percent and in 2009 the firm went bankrupt we argue that the conventional explanation for this decline namely high legacy labor and healthcare costs is seriously incomplete and that gm s share collapsed for many of the same reasons that many highly successful american firms of the 1960s were forced from the market including a failure to understand the nature of the competition they faced and an inability to respond effectively once they did we focus particularly on the problems gm encountered in developing the relational contracts essential to modern design and manufacturing and we discuss a number of possible causes for these difficulties we suggest that gm s experience may have important implications for our understanding of the role of management in the modern knowledge based firm and for the potential revival of manufacturi

the impact of sectoral shifts and the aggregate labour market on unemployment duration this study investigates the effects of sectoral shifts among industries on unemployment duration these effects are decomposed into two subeffects the overall effect and the specific industrial effect the former is equal for all of the unemployed in all industries while the latter depends on the tightness of the demand for labour of the industry in question in addition the impact of the aggregate labour market on unemployment duration is also explored the empirical results show that most of the overall and all of the specific effects are significant indicating that the sectoral shifts among industries as well as the aggregate labour market do in fact impact unemployment duration and that the effects on unemployment duration vary in terms of their tightness in the different industrial labour markets

what determines productivity lessons from the dramatic recovery of the u s and canadian iron ore industries following their early 1980s crisis great lakes iron ore producers had faced no competition from foreign iron ore in the great lakes steel market for nearly a century as the 1970s closed in the early 1980s as a result of unprecedented developments in the world steel market brazilian producers were offering to deliver iron ore to chicago the heart of the great lakes market at prices substantially below prices of local iron ore the u s and canadian iron ore industries faced a major crisis that cast doubt on their future in response to the crisis these industries dramatically increased productivity labor productivity doubled in a few years whereas it had changed little in the preceding decade materials productivity increased by more than half capital productivity increased as well i show that most of the productivity gains were due to changes in work practices work practice changes reduced overstaffing and hence increased labor productivity by increasing the fraction of time equipment was in operating mode changes in work pra

competition and relational contracts in the rwanda coffee chain how does competition affect market outcomes when formal contracts are not enforceable and parties resort to relational contracts difficulties with measuring relational contracts and dealing with the endogeneity of competition have frustrated attempts to answer this question we make progress by studying relational contracts between upstream farmers and downstream mills in rwanda s coffee industry first we identify salient dimensions of their relational contracts and measure them through an original survey of mills and farmers second we take advantage of an engineering model for the optimal placement of mills to construct an instrument that isolates geographically determined variation in competition conditional on the suitability for mills placement within the catchment area we find that mills surrounded by more suitable areas i face more competition from other mills ii use fewer relational contracts with farmers and iii exhibit worse performance an additional competing mill also iv reduces the aggregate quantity of coffee supplied to mills by farmers and v makes farmers worse off competition hampers relational contracts directly by increasing farmers temptation to default on the relational contract and indirectly by reducing mill s profits

report cards the impact of providing school and child test scores on educational markets this paper studies study the impact of providing school and child test scores on subsequent test scores prices and enrollment in markets with multiple public and private providers a randomly selected half of the sample villages markets received report cards this increased test scores by 0 11 standard deviations decreased private school fees by 17 percent and increased primary enrollment by 4 5 percent heterogeneity in the treatment impact by initial school quality is consistent with canonical models of asymmetric information information provision facilitates better comparisons across providers improves market efficiency and raises child welfare through higher test scores higher enrollment and lower fees

differences in unemployment duration a regional or a personal problem 1988 differences in unemployment duration a regional or a personal problem applied economics vol 20 no 9 pp 1233 1251

re employment probabilities of unemployment benefit recipients this article studies transitions out of unemployment for benefit recipients in spain we analyse the duration of unemployment distinguishing between spells that end in recall workers returning to the previous employer and spells that end in exit to a new job this distinction allows us to find that the recall hazard rate increases around the time of exhaustion of benefits however this happens only for workers receiving unemployment insurance ui because we are unable to replicate this result for workers receiving unemployment assistance ua we believe the finding lends support to the hypothesis that in spain firms and workers make a strategic use of ui

the effects of fiscal consolidations on the composition of government spending abstractin response to increasing debt paths governments often implement fiscal consolidation programs this paper studies the impact of these programs on the composition of government spending s

a new look at the ui effect on transitions from unemployment into wage employment in spain the limited duration of the ui benefits entitlement this article is a new look at the study of the unemployment insurance effect on the transition probability from unemployment into wage employment in spain it is found that individuals increase their search effort and reduce their reservation wage as the unemployment insurance benefit entitlement exhaustion approaches and their exit rate equals that of the unemployed who never got benefits from the exhaustion moment financial constraints are not important in spain business cycle affects more to long term unemployed and finally it is found that the probability of being offered a vacancy decreases with time spent in unemployment having allowed for unobservable heterogeneity

the value of relationships evidence from a supply shock to kenyan rose exports this paper provides evidence on the importance of reputation in the context of the kenyan rose export sector a model of reputation and relational contracting is developed and tested a seller s reputation is defined by buyer s beliefs about seller s reliability we show that i due to lack of enforcement the volume of trade is constrained by the value of the relationship ii the value of the relationship increases with the age of the relationship and iii during an exogenous negative supply shock deliveries are an inverted u shaped function of relationship s age models exclusively focusing on enforcement or insurance considerations cannot account for the evidence jel d86 f14 l14 o13 o19 q17 imperfect contract enforcement is a pervasive feature of real life commercial transactions in the absence of formal contract enforcement trading parties rely on informal mechanisms to guarantee contractual performance e g johnson mcmillan and woodruff 2002 greif 2005 fafchamps 2010 among those mechanisms long term relationships based on trust or reputation are perhaps the most widely studied and have received substantial theoretical attention the theoretical literature has developed a variety of models that capture salient features of real life relationships e g enforcement problems e g macleod and malcomson 1989 baker gibbons and murphy 1994 baker gibbons and murphy 2002 levin

time versus state in insurance experimental evidence from contract farming in kenya the gains from insurance arise from the transfer of income across states yet by requiring that the premium be paid upfront standard insurance products also transfer income across time we show that this intertemporal transfer can help explain low insurance demand especially among the poor and in a randomized control trial in kenya we test a crop insurance product which removes it the product is interlinked with a contract farming scheme as with other inputs the buyer of the crop offers the insurance and deducts the premium from farmer revenues at harvest time the take up rate is 72 compared to 5 for the standard upfront contract and take up is highest among poorer farmers additional experiments and outcomes indicate that liquidity constraints present bias and counterparty risk are all important constraints on the demand for standard insurance finally evidence from a natural experiment in the united states exploiting a change in the timing of the premium payment for federal crop insurance sho s that the transfer across time also affects insurance adoption in developed countries

reputation effects and the limits of contracting a study of the indian software industry this paper examines evidence of the role that reputation plays in determining contractual outcomes we conduct an empirical analysis of the indian customized software industry using a data set we collected containing detailed information on 230 projects carried out by 125 software firms we propose a model ofthe industry where reputation determines contractual outcomes the evidence supports the view that reputation matters ex ante contracts as well as the outcome after ex post renegotiation vary with firms characteristics plausibly associated with reputation this holds after controlling for project client and firm characteristics

the missing missing middle the notion that the distribution of firm size in poor countries is characterized by a bimodal distribution with a missing middle is a widely accepted fact in development economics for example see krueger 2013 the idea of the missing middle is that there are a large number of small firms some large firms but very few medium sized firms the purported fact about the missing middle is cited as evidence for two broad stories of why many countries are poor perhaps surprisingly these models look for the cause of the missing middle in two fundamentally different places one approach suggests that small firms are disfavored in low income countries for example by a lack of access to financial capital and thus face difficulties in growing to become middle sized firms the other approach posits a dual economy of large high productivity firms and small low productivity firms and then suggests that larger firms are disfavored in low income countries for example by having to bear large fixed costs of regulation which make it difficult for middle sized firms to become established we begin by reviewing these theories of development based on the purported fact of a missing middle we then explore the evidence on distribution of firm sizes in more detail and challenge the presumption that a missing middle occurs at all we present three main facts first there is in fact no evidence of a missing middle in detailed and comprehensive data on the size of manufacturing firms in india indonesia or mexico regardless of how we slice the data to be sure there