a new and robust subgame perfect equilibrium in a model of triadic power relations abstract this note presents a new subgame perfect equilibrium in an infinitely repeated game which has basu s triadic model as the stage game oxford econ pap 38 1986 259 the payoff for the laborer is the same as in basu s model the equilibrium is more robust than the naqvi and wemhoner s solution j dev econ 47 1995 191 in the sense that the equilibrium does not require the same high degree of rationality simple well known strategies are applied and both the landlord and the merchant are better off than in the stage game in the equilibrium outcome the merchant receives a share of the extra profit from the extortionary labor contract

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

a theory of interlinked rural transactions this paper argues that the interlinking of labor output and credit contracts often observed in rural economies can be regarded as an attempt to improve allocative efficiency in the face of moral hazard it advances an economic explanation of the phenomenon which is rooted in the view that prevalent modes of transaction of which interlinked contracts are an example are shaped by technological considerations interlinking is shown to be an efficient economic response to unequally distributed information arising from the uncertainty which characterizes subsistence agriculture all pareto efficient allocations require a combination of wage cum output sharing with consumption credit contracts the analytical framework set up to demonstrate the results is used to examine the response of the contractual parameters to changes in i the returns to alternative occupations available to tenant laborers ii the cost of credit to the village economy and iii the riskiness of cultivation the analysis concludes that public policy to alleviate rural poverty must recognize the relationships between technological considerations and modes of transaction in the absence of a complete set of markets

interlinkage limited liability and strategic interaction abstract the literature on interlinkage is inconclusive regarding the strict superiority of this arrangement we analyze a landlord and a moneylender as two players making non cooperative decisions regarding the terms of their respective contracts with a tenant in the sequential game where the landlord moves first and the tenant has limited liability we demonstrate that there exist circumstances in which interlinkage is superior even with nonlinear loan contracts a result that carries over when there is moral hazard the incorporation of risk aversion yields strict superiority in general the main result is unaffected by changes in the seniority of claims but is sensitive to changes in the order of moves limited liability ceases to ensure the strict superiority of interlinked contracts if the principal who provides the variable factor of production moves first even if he has junior claims to the output

symbiosis vs crowding out the interaction of formal and informal credit markets in developing countries abstract it is a common observation in many developing countries that enterprises are active borrowers in both formal and informal credit markets we propose a model in which the formal sector s superior ability in deposit mobilization is traded off against the informational advantage that lenders in the informal sector enjoy the formal sector can screen borrowers by providing only partial financing for projects thereby forcing borrowers to resort to the informal sector for the remainder of the loan we use the model to predict how the market structure responds to changes in the environment and we consider the policy implications of various forms of government intervention

the use of village agents in rural credit delivery using a simple principal agent model this article examines the incentive problems that arise when a formal financial institution such as a rural bank utilises a member of the rural community to act as an agent in screening potential borrowers and collecting repayment optimal compensation schemes are derived for the agent and their implications are discussed in addition i show that the norms and rules that govern village life may aid the financial institution by helping to constrain possible strategic behaviour by the agent

access to capital in rural thailand an estimated model of formal versus informal credit the aim of this paper is to understand the mechanism underlying access to credit the author focuses on two important aspects of rural credit markets in thailand first moneylenders and other informal lenders coexist with formal lending institutions such as government or commercial banks and more recently micro lending institutions second potential borrowers presumably face sizable transaction costs obtaining external credit the author develops and estimates a model based on limited enforcement and transaction costs that provides a unified view of those facts the results show that the limited ability of banks to enforce contracts more than transaction costs is crucial in understanding the observed diversity of lenders

a little at a time the use of regularly scheduled repayments in microfinance programs abstract informal lenders appear to be thriving even in regions where microfinance institutions mfis such as the grameen bank have established lending programs we suggest that an explanation for this well documented observation lies in the ubiquitous use of regularly scheduled repayments by mfis borrowers are typically required to repay their loans in tightly structured installments beginning soon after loan disbursement this little remarked aspect of the repayment schedule is usually explained as inculcating fiscal discipline among borrowers we argue that an alternative rationale for this loan repayment structure lies in the difficulty of monitoring borrowers actions the potential for moral hazard leads mfis to use innovative mechanisms such as regularly scheduled repayments which indirectly coopt the better informed informal lenders conversely this installment repayment structure allows informal lenders to survive further we show that this linkage can not only expand the volume of informal lending but may also raise the interest rate in the informal sector

credit layering in informal financial markets abstract informal lenders with access to markets or capital often find it attractive to delegate loan provision to downstream lenders who have an information or enforcement advantage in dealing with particular borrowers in this paper we examine the conditions under which such an arrangement is preferred by two informal lenders a landlord and a merchant who compete in loan provision to tenant farmers differentiated by wealth we show that credit layering is preferred only when tenants are sufficiently poor in this case the trader lends to tenant farmers via a contract with their landlord otherwise only the trader lends as a consequence a pattern of borrowing emerges in which relatively wealthy tenants borrow from merchants while poor tenants borrow mainly from their landlords interlinkage between land and credit thus arises only for a subset of tenants and purely as a consequence of credit layering this pattern is shown to be supported empirically

imperfect information screening and the costs of informal lending a study of a rural credit market in pakistan many governments have perceived the rural moneylender as usurious this article takes a first step toward directly testing the validity of this view in a study of services costs and charges of fourteen informal market moneylenders and their clients in chambar pakistan the article examines whether the high implicit interest rates charged reflect the actual costs of operating in that market estimates of the resource costs incurred by informal lenders for screening pursuing delinquent loans overhead and cost of capital including unrecoverable loans suggest that lenders charges are equal to their average cost of lending but exceed their marginal cost this finding is consistent with the view that the informal credit market is characterized by excess capacity and monopolistic competition in the presence of imperfect information

production externalities and two way distortion in principal multi agent problems this paper studies an otherwise standard principal agent problem with hidden information but where there are positive production externalities between agents the output of any agent depends positively on the effort expended by other agents it is shown that the optimal contract for the principal exhibits two way distortion the effort of any agent is oversupplied relative to the first best when his marginal cost of effort is low and undersupplied taken his marginal cost of effort is high this pattern of distortion cannot otherwise arise in optimal single or multi agent incentive contracts unless there are countervailing incentives however unlike the countervailing incentives case the pattern of distortion we find is robust to the precise form of the externality journal of economic literature classification numbers d21 d28 c 2000 academic press

optimal incentive contracts with multiple agents abstract a setting in which a single principal contracts with two agents who possess perfect private information about their own productivity is considered with correlated productivities each agent s private information also provides a signal about the other agent s productivity in contrast to the setting in which there is only one agent it is shown that such private information may be of no value to the agents it is only if the agents are risk averse that their private information may allow them to command rents moreover when the agents are constrained only to reveal their private information truthfully as a nash equilibrium the pareto optimal incentive scheme may induce the agents to adopt strategies other than truth telling this leads to the consideration of truth telling equilibria that are not pareto dominated in the subgame played by the agents among all such equilibria the one preferred by the principal restricts one agent to tell the truth as a dominant strategy and the other as a nash response to truth

the thai rural credit system public subsidies private information and segmented markets thailand has sought to increase farmers access to credit by government intervention in 1966 it created a government agricultural bank to lend solely to farm households and beginning in the late 1970s it required commercial banks to lend heavily in the rural sector either directly or by making deposits in the agricultural bank the result was an enormous expansion of credit in the rural sector but because formal lenders were either unable or unwilling to solve the information problems involved in the broad range of rural credit transactions the informal credit sector wbich charged interest rates many times higher than the formal sector continued to thrive using household surveys and surveys of moneylenders this article provides a detailed analysis of the ways in which lenders in the informal sector have solved the information problems of providing credit the authors argue that the informal sector is competitive and that high interest rates reflect high information costs not the scarcity of funds this article reports on a set of investigations of the impact of thai government policies to expand bank lending in the rural sector their purpose was to increase farmers access to capital and reduce their dependence on informal lenders fifteen years after the principal government measures were introduced we hope to be able to answer several questions how has the expansion of formal sector lending affected the informal sector did the increase in the supply of formal credit reduce the business of informal lenders and lower interest rates in the informal market what has been the performance of the formal credit system in terms of coverage efficiency and incidence lacking time series data on the informal sector we cannot give a direct answer to these questions but we can with confidence say that the informal lenders are still very much alive by examining the behavior of the rural credit market at the present time we can throw an indirect light on what transpired over the last fifteen years our main findings are the following on the basis of our 1984 85 survey of households and moneylenders

moneylenders and bankers price increasing subsidies in a monopolistically competitive market abstract in many areas of the world a significant part of the cost of obtaining a good or service is the cost of enforcing the contracts entailed in its provision we present models of markets with endogenous enforcement costs motivated by studies of rural credit markets we show that subsidies may have perverse effects under monopolistic competition increasing prices or inducing exit higher prices interest rates result from the loss of scale economies or from negative externalities among suppliers the models are consistent with the puzzling evidence that infusions of government subsidized formal credit have not improved the terms offered by moneylenders

formal informal sector interaction in rural credit markets abstract the majority of small cultivators in the less developed countries are not regarded as credit worthy by the formal sector financial institutions and are forced to borrow from the moneylenders in the informal credit market this paper shows that when such borrowers differ in their likelihood of default and the moneylenders are asymmetrically informed about the client specific degree of risk the policy of providing cheap credit through the formal sector can generate adverse composition effects which worsen the terms of credit and the availability of loans in the informal sector

sharecropping and the interlinking of agrarian markets one of the often noted features of less developed agrarian economies is the existence of interlinkages among the land labor credit and product markets the landlord is often the supplier of credit he frequently purchases and markets the output of the tenant farmers and often sells raw materials and even consumption goods to his tenant farmers how can this phenomenon be explained what are the welfare consequences of attempts to restrict these practices which often seem to constitute restraints on free trade these are the questions to which this paper is addressed a general set of arguments applicable to both competitive and noncompetitive environments are presented to situations where all the terms of the contract are determined in an optimal way as well as to situations where many of the terms are specified institutionally section i examines interlinked credit and tenancy contracts section ii examines interlinked marketing and tenancy contracts section iii points out the possible interlinking between labor contracts and consumption goods markets and section iv presents the different equilibrium frameworks discussed in the paper such as monopoly monopsony competition and equilibria with surplus labor

limited liability wealth differences and tenancy contracts in agrarian economies abstract an explanation is provided for two observations concerning variations in the choice of tenants and their welfare differences in tenants wealth imply corresponding differences in liability when default is possible on fixed rental commitments in this context the inability of landlords to specify their tenants effort lead to effort choices that vary with the type of contract offered the selection of tenants and the contract terms they receive thus depend on wealth with wealthier tenants being preferred and receiving fixed rent contracts these results also predict that wealthier tenants earn higher profits on their leased plots

unequal participation democracy s unresolved dilemma presidential address american political science association 1996 low voter turnout is a serious democratic problem for five reasons 1 it means unequal turnout that is systematically biased against less well to do citizens 2 unequal turnout spells unequal political influence 3 u s voter turnout is especially low but measured as percent of voting age population it is also relatively low in most other countries 4 turnout in midterm regional local and supranational elections less salient but by no means unimportant elections tends to be especially poor 5 turnout appears to be declining everywhere the problem of inequality can be solved by institutional mechanisms that maximize turnout one option is the combination of voter friendly registration rules proportional representation infrequent elections weekend voting and holding less salient elections concurrently with the most important national elections the other option which can maximize turnout by itself is compulsory voting its advantages far outweigh the normative and practical objections to it

a simpler mechanism that stops agents from cheating abstract this note considers a principal multi agent model of a firm subject to adverse selection with just the usual optimal incentive constrained contracts being offered there exist multiple bayes nash equilibria in the agents subgame moreover from the agents perspective there exists an equilibrium that pareto dominates the equilibrium desired by the principal by exploiting the structure of the model this note develops a new approach for eliminating unwanted equilibria while retaining the desired equilibrium the approach when compared to existing approaches employs a simpler mechanism one with a smaller message space and makes weaker assumptions about the agents behavior journal of economic literature classification numbers c72 d82

state contingent rent reduction and tenancy contract choice abstract this study introduces a fixed rent contract with a state contingent rent reduction widely adopted in japan in the early 20th century which a fixed rent was temporary reduced in case of poor harvest the economic implications of this contract are analyzed with a principal agent model it is shown that if the tenant is not too risk averse and or the variability of the yield is not too high then this contract is preferable for the landlord to a fixed rent contract or a share tenancy preliminary tests on the risk sharing implication of a share contract are also provided using the historical data for japan and korea

interactions between institutional and informal credit agencies in rural india in an attempt to expand rural credit and displace the village moneylender india created a system of rural cooperatives in the 1950s and expanded branch banking into rural areas in the 1970s this article examines how these measures affected the rural market it begins with the question of how large the expansion of institutional credit has been and the extent to which it has dislodged the village and nonresident moneylenders a detailed comparison of three major surveys of the indian rural credit market suggests that in various guises the moneylender is still a major source of loans the article also examines the weak evidence on intermediation between the formal and informal sectors a formal model of the interaction between the informal moneylender and institutional lender is constructed under a variety of assumptions about the exclusivity of loan contracts and the competitive structure of the informal sector the conclusions are drawn together in the form of five proposals for public policy