agroindustrialization globalization and international development an overview of issues patterns and determinants this paper offers an overview for a special issue on agroindustrialization globalization and international development it sets out a conceptual framework for understanding the links among these three broad phenomena and then discusses emerging issues and evidence concerning the factors conditioning agroindustrialization in developing countries and the subsequent effects on employment poverty and the natural environment we conclude with a research agenda

anomalies risk aversion economists ubiquitously employ a simple and elegant explanation for risk aversion it derives from the concavity of the utility of wealth function within the expected utility framework we show that this explanation is not plausible in most applications since anything more than economically negligible risk aversion over moderate stakes requires a utility of wealth function that is so concave that it predicts absurdly severe risk aversion over very large stakes we present examples of how the expected utility framework has misled economists and why we believe a better explanation for risk aversion must incorporate loss aversion and mental accounting

dynamics of smallholder participation in horticultural export chains evidence from ecuador we study the dynamics of smallholder participation in export value chains focusing on the example of small scale broccoli producers in the highlands of ecuador combining cross sectional data from a household survey with 11 year longitudinal data on export market transactions we explain the hazards of dropping out of a high value export chain we apply a multispell cox duration model that allows us to consider multiple entries and exits from the supply chain we also provide evidence on the welfare impacts associated with participation the results suggest that small scale farmers exit from the export sector is accelerated by high transaction risks experienced in the past while we find no particular evidence for the exclusion of small scale farmers from the export sector we do find that poorer households and female headed households tend to drop out faster especially as long as the sector is still prospering finally when considering welfare effects we do not find evidence that participation translates into tangible benefits for broccoli farmers we discuss some measures that could help improve the long term sustainability of smallholder integration in high value chains

ceo pay and the argument from peer comparison chief executive officers ceos are typically paid great amounts of money in wages and bonuses by commercial companies this is sometimes defended with an argument from peer comparison roughly that our ceo has to be paid in accordance with what other ceos at comparable companies get at first glance this seems like a poor excuse for morally outrageous pay schemes and consequently the argument has been ignored in the previous philosophical literature in contrast however this article provides a partial defence of the argument from peer comparison moreover it is demonstrated how a serious consideration of this argument sheds further light on both incentive and desert based theories of just pay

how private contract enforcement mechanisms can succeed where public institutions fail the case of juhocukor a s the enforcement of contracts is necessary for efficient exchange and investment in economic activities contracts can be enforced through a variety of mechanisms both public and private however in many developing and transitional countries these public institutions are either absent or ineffective in ensuring contract enforcement under such conditions private enforcement mechanisms may provide a suitable replacement for public enforcement institutions this may be done externally through a third party or internally through self enforcing agreements this paper analyzes the use of self enforcing arrangements or internal private enforcement mechanisms using a case study of an agri business in a transition economy juhocukor a s a slovakian sugar processor we show that the use of internal private contract enforcement mechanisms can have a significant positive effect on output and efficiency for both partners to the exchange transaction in an environment characterized by the absence or ineffectiveness of public enforcement institutions 2000 elsevier science b v all rights reserved

transaction costs strategic interaction and farm restructuring this article offers a transaction cost explanation for the different paths of organizational adjustment in the case of the former state and collective farms in czech republic after 1989 the focus is the strategic interaction among the stakeholders in the agricultural organization undergoing restructuring in the presence of a neutral institutional environment the number of players involved in the intraorganizational process their ability to make collective decisions and their perceived payoffs in alternative farming structures determine the restructuring outcome these factors influence the choice between maintaining the inherited deployment of assets and the creation of a deeply restructured organization empirical results based on a farm level data set support this basic idea

the effect of myopia and loss aversion on risk taking an experimental test myopic loss aversion is the combination of a greater sensitivity to losses than to gains and a tendency to evaluate outcomes frequently two implications of myopic loss aversion are tested experimentally 1 investors who display myopic loss aversion will be more willing to accept risks if they evaluate their investments less often 2 if all payoffs are increased enough to eliminate losses investors will accept more risk in a task in which investors learn from experience both predictions are supported the investors who got the most frequent feedback and thus the most information took the least risk and earned the least money language en

contract enforcement social efficiency and distribution some experimental evidence we use economic experiments to investigate how different contract enforcement regimes affect efficiency and the distribution of surplus in a vertically coordinated market with buyer concentration we find that if a third party e g government perfectly enforces contracts social efficiency is enhanced we also find that when third party enforcement is imperfect social efficiency will not necessarily decrease because trading partners find ways to self enforce contracts however opportunistic behavior by some traders leaves some sellers growers with ex post profits below reservation levels finally partial or one sided third party enforcement causes significant efficiency losses by constraining subjects ability to use informal enforcement instruments

an experiment on risk taking and evaluation periods does the period over which individuals evaluate outcomes influence their investment in risky assets results from this study show that the more frequently returns are evaluated the more risk averse investors will be the results are in line with the behavioral hypothesis of myopic loss aversion which assumes that people are myopic in evaluating outcomes over time and are more sensitive to losses than to gains the results have relevance for the equity premium puzzle and also for the marketing strategies of fund managers

globalization privatization and vertical coordination in food value chains in developing and transition countries food and agricultural commodity value chains in developing and transition countries have undergone tremendous changes in the past decades companies and property rights have been privatized markets liberalized and economies integrated into global food systems the liberalization and privatization initially caused the collapse of state controlled vertical coordination more recently private vertical coordination systems have emerged and are growing rapidly as a response to consumer demand for food quality and safety on the one hand and the farms production constraints caused by factor market imperfections in this article we 1 demonstrate the importance of these changes 2 discuss the implications for efficiency and equity and 3 provide empirical evidence on the effects in several developing and transition countries

why does the law of one price fail an experiment on index mutual funds we conduct an experiment to evaluate why individuals invest in high fee index funds in our experiments subjects allocate 10 000 across four s p 500 index funds and are rewarded for their portfolio s subsequent return subjects overwhelmingly fail to minimize fees we can reject the hypothesis that subjects buy high fee index funds because of bundled non portfolio services search costs for fees matter but even when we eliminate these costs fees are not minimized instead subjects place high weight on annualized returns since inception fees paid decrease with financial literacy interestingly subjects who choose high fee funds sense they are making a mistake

a framework to facilitate institutional arrangements for smallholder supply in developing countries an agribusiness perspective the industrialization of agriculture and the potential problem of small scale farmer marginalization calls for a fresh approach to the design of agribusiness supply chain arrangements in developing countries the objective of the paper is to contribute to a better understanding of institutional arrangements that can promote stable smallholder agribusiness contracting arrangements in a developing country context a case study approach incorporating a transaction cost framework is used to test whether trust can significantly change the contract characteristics of supply the results suggest that although the presence of trust can influence the contract characteristics of a supply arrangement it may not be significant because of other factors in a developing country context bearing this in mind a number of institutional arrangements are recommended in order to promote more stable contract conditions

economics and politics of food standards trade and development standards have played an important role in food trade for a very long time their rapid growth in recent years has triggered vigorous debates on their impacts on international trade and development with many arguing that standards are non tariff barriers to trade and that standards are marginalizing the poor i present conceptual frameworks and review empirical evidence on the equity and efficiency effects and the political economy of standards models which incorporate essential aspects of standards yield complex theoretical results and nuanced conclusions careful empirical analyses support such nuanced arguments and find complex effects for trade standards can create welfare gains but also involve rent redistribution which induces lobbying by interest groups to set the standards at their preferred level this makes it difficult to distinguish socially desirable standards from those resulting from political rent seeking for development it is crucial to explicitly account for a the endogeneity of the institutional organization of value chains and b both smallholder contracting and employment creation on large scale farms when considering the impact of standards on development and poverty

are teams prone to myopic loss aversion an experimental study on individual versus team investment behavior abstract myopic loss aversion mla has been found to have a persistent influence on individual decision making under risk in this paper i show that team decision making attenuates mla but that teams are also prone to mla

application of distributive justice theory to the ceo pay problem recommendations for reform an ethical analysis of chief executive officer ceo salaries can be approached via theory on distributive justice and an examination of some corporate codes of ethics u s ceo salaries are compared with their japanese and european counterparts and factors behind the high u s ceo salaries are reviewed the negative repercussions of high pay are discussed including feelings of unfairness declining morale and greater cynicism found in lower level employees reduced research and development budgets and downsized organizations are related to the maintenance of high ceo salaries after considering economic repercussions recommendations for reform which lead to the greatest expected benefit of the least advantaged are made

contractual arrangements and enforcement in transition agriculture theory and evidence from china abstract this paper empirically investigates the relationship between contractual arrangements and their enforcement in chinese agriculture based on an analysis of a survey of 100 agribusiness firms engaged in contract farming in zhejiang province of china we find that private contract enforcement mechanisms play an important role in influencing smallholders decisions to breach or fulfill contracts contract arrangements such as floor pricing or requiring smallholders to make specific investments facilitate self enforcement and significantly improve the smallholder s contract fulfillment rate this is particularly important in chinese agriculture since the business environment is characterized by an absence of effective public enforcement institutions

does aggregated returns disclosure increase portfolio risk taking many experiments have found that participants take more investment risk if they see returns less frequently see portfolio level returns rather than each individual asset s returns or see long horizon rather than one year historical return distributions in contrast we find that such information aggregation treatments do not affect total equity investment when we make the investment environment more realistic than in prior experiments previously documented aggregation effects are not robust to changes in the risky asset s return distribution or the introduction of a multi day delay between portfolio choice and return realizations

the economics of agricultural decollectivization in east central europe and the former soviet union 1989 include both the privatization of agricultural production assets and the restructuring of state and collective farms farm restructuring and more specifically the breakup of large scale agricultural production units into individually operated farms a process we define as decollectivization differ considerably for the various ece and fsu countries differences in decollectivization can be observed across countries between regions within a country and over time we argue that these differences are not random this article identifies the factors that affect the decollectivization process and shows how they are consistent with empirically observed differences in agricultural decollectivization in ece and fsu countries the decollectivization process is a consequence of the decision of collective farm members to leave the collective production framework and start up individual farms factors affecting this decision are the expected productivity and profitability of individual farming relative to collective farming and the costs for individuals to leave the collective farm and start up an individual farm these costs are affected by land reform privatization and decollectivization regulations the relative productivity of individual versus collective farming depends on the distribution of collective farmers productivity the prereform average collective farm productivity and the advantages and disadvantages of individual farming compared to collective farming the literature on decollectivization identifies both advantages and disadvantages in collective production some of which would not extend beyond the transition period disadvantages include high transaction costs associated with the monitoring of labor and inefficiencies due to the right of

liberalization endogenous institutions and growth a comparative analysis of agricultural reforms in africa asia and europe thirty years ago a vast share of low and middle income countries was heavily state controlled the liberalizations of the 1980s and 1990s had greatly different effects on growth in countries in africa asia and europe a comparative framework is used to document these differences and a model is developed to formally analyze how liberalization affects production and income distribution when the institutions that govern production and exchange are also affected hypotheses are derived for how endogenous institutional adjustments affect the growth response to liberalization these insights motivate a series of explanations for the differences in performance across regions and commodities following liberalization

success and failure of reform insights from the transition of agriculture this paper analyzes the linkages between the reform strategies in transition countries and economic performance the authors focus on agriculture because of the sharpness of the policy changes fundamental differences among countries and relative simplicity of agricultural relationships the authors document post reform performance in the transition countries of asia and europe the authors show how a pricing reform and subsidy reductions b land rights reform and policies that affect farm restructuring and c the presence institutions that facilitate exchange either markets or market substitutes affect output and productivity the paper ends with general lessons on reforms and transition

courts and contract enforcement in transition agriculture theory and evidence from poland abstract the paper investigates theoretically and empirically the role of courts for contract enforcement in transition agriculture in a survey of 306 polish farmers conducted in 1999 only 38 5 respondents reported to believe that they could use courts to enforce contracts with their most important customer furthermore those who believed the legal system could be used would accept significant financial losses before taking action we develop a theoretical model based on the costs and benefits of court enforcement which captures the boundary between contracts to be regarded as enforceable and not enforceable and simultaneously the threshold of taking legal action the empirical analysis strongly supports our model 1 the farmers responses can be explained by cost benefit calculations regarding the use of courts 2 the legal enforceability of contracts depends not only on the efficiency of the legal system but also on the attributes of the transaction the contracts and the relationship between buyer and seller and 3 the threshold of taking legal action is significantly influenced by indirect costs of court enforcement such as the disruption of a valuable business relationship and by the availability of alternative enforcement mechanisms

myopic prospect theory vs myopic loss aversion how general is the phenomenon abstract individuals often act myopically in evaluating sequences of investment opportunities for loss averse decision makers myopia causes the sequence to look less attractive and might result in rejecting an investment program that would have been accepted otherwise in this paper we argue that the relation between myopia and the attractiveness of a lottery sequence is less general than previously suggested in the literature we extend the concept myopic loss aversion to myopic prospect theory predicting that for specific risk profiles myopia will not decrease but increase the attractiveness of a sequence we support our theoretical predictions by experimental evidence

private enforcement capital and contract enforcement in transition economies the enforcement of contracts is necessary for efficient exchange and investment in economic activities there are many situations where public institutions are ineffective in enforcing contracts this is the case in economies in transition where public enforcement institutions themselves are being reformed under such conditions private mechanisms could enforce contracts external private enforcement is done by third parties e g strong arm private agents although such enforcement may be effective it may have unwanted externalities alternatively internal private enforcement can be done through the use of so called private enforcement capital i e private losses that result from breaching the contract these losses result directly from contract termination or non renewal and indirectly from reputational damage by designing contracts such that these private losses from contract breach outweigh potential benefits contracts can be made self enforcing in this article we first present a conceptual framework to interpret contracts and to analyze how the use of private enforcement capital can enforce contracts then we illustrate such internal private contract enforcement mechanisms with several case study examples of agri business contracting in transition countries where public enforcement fails

what s wrong with executive compensation i broadly explore the question by examining several common criticisms of ceo pay through both philosophical and empirical lenses while some criticisms appear to be unfounded the analysis shows not only that current compensation practices are problematic both from the standpoint of distributive justice and fairness but also that incentive pay ultimately exacerbates the very agency problem it is purported to solve

the disposition effect in securities trading an experimental analysis the disposition effect is the tendency to sell assets that have gained value winners and keep assets that have lost value losers disposition effects can be explained by the two features of prospect theory the idea that people value gains and losses relative to a reference point the initial purchase price of shares and the tendency to seek risk when faced with possible losses and avoid risk when a certain gain is possible our experiments were designed to see if subjects would exhibit disposition effects subjects bought and sold shares in six risky assets asset prices fluctuated in each period contrary to bayesian optimization subjects did tend to sell winners and keep losers when the shares were automatically sold after each period the disposition effect was greatly reduced

the future of small farms new directions for services institutions and intermediation summary efficient pre and post harvest services are essential if small farms in high potential areas are to intensify production contribute to economic growth and reduce poverty they also matter if small farms in marginal areas are to manage their natural resource base in the face of growing population pressure and climate change difficulties that smallholders face in accessing services are reviewed showing how incentives for commercial delivery of services to smallholders differ between staple food traditional cash crop and high value product supply chains the major challenge in service delivery to smallholders in much of africa concerns coordination of service development and delivery different forms of intermediary institution for achieving such coordination are examined

evaluation periods and asset prices in a market experiment we test whether the frequency of feedback information about the performance of an investment portfolio and the flexibility with which the investor can change it influence her risk attitude in markets in line with the prediction of myopic loss aversion benartzi and thaler 1995 we find that more information and more flexibility result in less risk taking market prices of risky assets are significantly higher if feedback frequency and decision flexibility are reduced this result supports the findings from individual decision making and shows that markets do not eliminate such behavior

impact of third party contract enforcement in agricultural markets a field experiment in vietnam we study the effect of alleviating the information asymmetry regarding product quality that is widespread in contracts between agricultural producers and buyers in developing countries opportunistic buyers may underreport quality levels to farmers to reduce the price that they have to pay in response farmers may curb investment thereby negatively affecting farm productivity in an experiment we entitle randomly selected smallholder dairy farmers in vietnam who are contracted by a large company to independently verify milk testing results results indicate that treatment farmers use 12 more inputs and they also increase their output significantly some wider research and policy implications are discussed

why hold ups occur the self enforcing range of contractual relationships one of my most enjoyable intellectual experiences was working with armen alchian on the klein crawford and alchian 1978 hold up paper in this paper i extend the basic framework presented in that paper pointing out what i now consider to be its shortcomings and providing insights into the nature of hold ups and the form of contracts chosen by transactors to avoid hold ups the major analytical extension entails combining hold up analysis with my work on private enforcement because private enforcement capital is limited and written contract terms are necessarily imperfect transactors must optimally combine court enforced written terms together with privately enforced unwritten terms to define what i call the self enforcing range of their contractual relationship hold ups occur when unanticipated events place the contractual relationship outside the self enforcing range this probabilistic framework where transactors enter contractual relationships knowing that a hold up may take place but believing that the expected gains from trade outweigh the expected rent dissipating costs associated with the hold up risk is shown to have important implications for understanding the structure of contracts adopted by transactors in the marketplace i why do hold ups occur i begin with a simple example that illustrates the basic economic forces involved in a hold up assume that a builder constructs a house on a piece of land the builder does not own but rather only leases short term after the initial land lease expires the landowner could hold up the builder by raising the land rent to reflect the costs of moving the house to another lot this example illustrates all the hold up factors emphasized in klein crawford and alchian a the builder has made an investment that is highly specific to a particular piece of land and b the landowner has taken advantage of the incompleteness of the contract that governs the relationship in particular the fact that the lease does not cover future years to c expropriate the quasi rents on the builder s specific investment the obvious question is why anything like this would ever occur that is why would someone be so naive as to build a house on land for which they had only a short term lease our primary goal in klein crawford and alchian was not to explain the existence of hold ups but rather the institutions adopted by transactors to avoid hold ups for example we would expect that builders anticipating a potential hold up problem would decide to purchase the land or at least to sign a long term ground lease before starting construction however we do present some examples in the paper of hold ups that actually occurred the implicit reason we give for the occurrence of these hold ups is transactor ignorance apparently transactors are not always smart enough to choose the contractual arrangement that would eliminate the hold up problem oliver williamson provides a similar but much more explicit answer to the question of why hold ups occur when defining opportunism he states by opportunism i mean self interest seeking with guile this includes but is scarcely limited to more blatant forms such as lying stealing and cheating opportunism more often involves subtle forms of deceit more generally opportunism refers to the incomplete or distorted disclosure of information especially to calculated efforts to mislead distort obfuscate or otherwise confuse 1 for example the hold up may have occurred in our illustrative house construction example because the landowner deceived the builder with a low up front land rental price and vague promises about the future relying on the ability of one transactor to take advantage of the naivete or ignorance of another transactor is a highly unsatisfactory way to explain the incidence of hold ups simple examples of deception such as a builder constructing a house on land that is only rented short term rarely if ever occur