smallholder market participation concepts and evidence from eastern and southern africa abstract this paper reviews the evidence on smallholder market participation with a focus on staple foodgrains i e cereals in eastern and southern africa in an effort to help better identify what interventions are most likely to break smallholders out of the semi subsistence poverty trap that appears to ensnare much of rural africa the conceptual and empirical evidence suggests that interventions aimed at facilitating smallholder organization at reducing the costs of intermarket commerce and perhaps especially at improving poorer households access to improved technologies and productive assets are central to stimulating smallholder market participation and escape from semi subsistence poverty traps macroeconomic and trade policy tools appear less useful in inducing market participation by poor smallholders in the region

on the effects of joint bidding in independent private value auctions an experimental study abstract this article explores the effect of a subset of symmetric bidders joining to bid together possible applications include mergers collusion and joint bidding arrangements the change produces a strong party with a more advantageous value distribution than the remaining weak bidder s the predicted effects include inefficiency a decrease in the seller s revenue and higher bidders payoffs under risk neutrality the members of the strong party benefit less than the weak bidders the prediction is reversed when the bidders are sufficiently risk averse these hypotheses are tested experimentally contrary to the theory joint bidding increases efficiency and the seller s revenue decreases by less than expected strong bidders benefit more than weak bidders indicating that incentives to bid jointly may be greater than hypothesized additionally the experiment assesses the effect of group decision making a nash equilibrium prediction for individual group differences based on differences in risk attitudes is not supported by the data

migration and fuel use in rural mexico many households in developing countries rely on renewable natural resources as their main source of energy collecting and burning firewood requires a considerable amount of time has negative health consequences and can cause deforestation and depletion of local resources if forests are not properly managed a transition from traditional to modern fuels can benefit households by reducing these negative effects migration a quintessential feature of development may facilitate this transition but its impacts on fuel choice are theoretically ambiguous it can reduce the household labor available for firewood collection and provide cash to purchase substitutes however it has an income effect that changes the demand for home cooked food and energy to cook it firewood or gas could be used to meet the increase in energy demand to resolve this theoretical ambiguity we use an instrumental variables method with household panel data from rural mexico and investigate the impact of mexico to us migration and remittances on gas expenditures and household labor allocated to firewood collection sending a migrant to the united states causes a significant decrease in reliance on firewood collection and an increase in both stove and gas purchases these findings have potentially far reaching environmental implications as labor moves off the farm

the response of the informal sector to trade liberalization this paper studies the relationship between trade liberalization and informality it is often claimed that increased foreign competition in developing countries leads to an expansion of the informal sector defined as the sector that does not comply with labor market legislation using data from two countries that experienced large trade barrier reductions in the 1980 s and 1990 s brazil and colombia we examine the response of the informal sector to liberalization in brazil we find no evidence of a relationship between trade policy and informality in colombia we do find evidence of such a relationship but only for the period preceding a major labor market reform that increased the flexibility of the colombian labor market these results point to the significance of labor market institutions in assessing the effects of trade policy on the labor market

smallholder dairying under transactions costs in east africa abstract it is argued that dairying is vital to future viability of many small farms in east africa and that high transactions costs for dairy production and marketing limit participation by asset and information poor smallholders case studies from kenya and ethiopia illustrate the role of dairy cooperatives in reducing transactions costs analysis of the determinants of producer prices received by a sample of dairy producers near addis ababa suggests that different levels of access to infrastructure assets and information explain why they contemporaneously accept widely different producer prices for fluid milk

entry into auctions an experimental analysis this paper investigates entry decisions into rst and second price auctions using an experimental design to extract information on willingness to pay to enter wte we nd that subjects tend to overpay to enter both auction formats in particular if the subjects believe they will be bidding against bidders following the risk neutral nash strategy their wte is greater than the optimal risk neutral amount 97 of the time for rst price auctions fpa and 90 for second price auctions spa if they believe that they are bidding against subjects who bid as do the other subjects they submit a wte that is too high 92 of the time for fpa and 69 of the time for spa we also nd in line with previous studies signicant overbidding in both the fpa and spa we then investigate whether introducing risk aversion ra or joy of winning joy can explain the joint observation of over entry and overbidding in particular using bid data alone we structurally estimate three models one allowing ra only one allowing for joy only and one allowing for both ra and joy while a model with joy alone overestimates wte we nd that ra alone can explain 38 of wte but a model with both ra and joy where ra is estimated using fpa bids and joy is estimated using spa bids can explain 65 of wte moreover joy appears to explain nearly all of the of the male wte but only 44 of the female wte

fertilizer subsidies and private market participation the case of kano state nigeria this article estimates the effect of a fertilizer voucher program on farmer participation in the private fertilizer market in nigeria using a double hurdle model to address corner solution challenges with estimating input demand and a control function approach to account for the endogeneity of subsidized fertilizer acquired the study finds evidence that receiving subsidized fertilizer in kano nigeria increased both the probability and extent of participation in the private fertilizer market findings demonstrate that under certain circumstances e g where input dealers links to farmer are weak there could be significant gains from the temporary use of voucher programs to strengthen such links

maize market participation among female and male headed households in ethiopia abstractthis paper examines the market participation gaps and their causes between female headed households fhhs and male headed households mhhs in ethiopia using an oaxaca blinder decomposition approach the results showed that structural coefficient effects accounted for 74 per cent 65 of the differences between fhh and mhh in the net buyer net seller maize market positions the gap between fhh and mhhs regarding quantities of maize sold was largely explained by endowment effects the results imply that closing the observed market participation gaps will require policy interventions that facilitate equal access for both fhhs and mhhs to resources and other supportive social networks

understanding overbidding in second price auctions an experimental study we present results from second price private value auction spa experiments where bidders may receive noisy signals about their opponentsvalue such signals change biddersperception about the strengthof their opponent and the relationship between biddersperception of their opponent and overbidding provides a novel channel to understand overbidding in spa we found that small and medium overbids are more likely to occur when bidders perceive their rivals to have similar values supporting a modifiedjoy of winninghypothesis but large overbids are more likely to occur when bidders believe their opponents to have much higher values consistent with thespite hypothesis second price private value auctions spas are the most easily understood auction format from a theoretical point of view 1 in standard private value auction models of fully rational bidders with standard preferences bidding one s own value is a weakly dominant strategy this theoretical prediction holds irrespective of biddersrisk atti tudes the number of rival bidders symmetry in the value distributions and so on in laboratory experiments however subjects are found to exhibit a consistent pattern of overbidding kagel et al 1987 found that the actual bids are on average 11 above the dominant strategy bids kagel and levin 1993 found that about 62 of all bids in their five bidder spa sessions exceed the bidder s value while only 8 of all bids were below it both kagel and levin 1993 and harstad 2000 further reported that experience has only a small effect in reducing overbidding in spa an important related finding is that overbidding in english auctions a mechanism that is strategically equivalent to the spa in the case of private values is known to be a short term phenomenon that subjects quickly learn not to undertake kagel and levin 1993 thus any explanation for the prevalence and persistence of overbidding in the spa must also explain its rarity in the english auction given the robustness of the findings of overbidding in spa it is surprising that economists have little understanding of why it happens kagel et al 1987 conjectured that bidding above one s own value in a spa is based on the illusion that it improves the probability of winning with little cost because the winner only pays the second highest bid 2 moreover they argue that overbidding is sustainable because bidders still on average earn positive profits and because the negative feedback from overbidding is a weak mechanism in the spa for example if a bidder overbids in a spa by 10 above her value it is quite possible that she does not win at all and thus does not experience

instruments randomization and learning about development there is currently much debate about the effectiveness of foreign aid and about what kind of projects can engender economic development there is skepticism about the ability of econometric analysis to resolve these issues or of development agencies to learn from their own experience in response there is increasing use in development economics of randomized controlled trials rcts to accumulate credible knowledge of what works without overreliance on questionable theory or statistical methods when rcts are not possible the proponents of these methods advocate quasirandomization through instrumental variable iv techniques or natural experiments i argue that many of these applications are unlikely to recover quantities that are useful for policy or understanding two key issues are the misunderstanding of exogeneity and the handling of heterogeneity i illustrate from the literature on aid and growth actual randomization faces similar problems as does quasi randomization notwithstanding rhetoric to the contrary i argue that experiments have no special ability to produce more credible knowledge than other methods and that actual experiments are frequently subject to practical problems that undermine any claims to statistical or epistemic superiority i illustrate using prominent experiments in development and elsewhere as with iv methods rct based evaluation of projects without guidance from an understanding of underlying mechanisms is unlikely to lead to scientific progress in the understanding of economic development i welcome recent trends in development experimentation away from the evaluation of projects and toward the evaluation of theoretical mechanisms jel c21 f35 o19

sales location among semi subsistence cassava farmers in benin a heteroskedastic double selection model in much of rural africa high transaction costs limit farmers market participation and thus their potential for income growth transaction costs can affect not only whether a farmer sells product but also whether sales occur at the farm gate or at a market if production behavior is related to a chosen sales location then analysis of interventions can be improved by explicit consideration of the decision of where to sell this article develops a double selection model that explains consumption and production decisions by semi subsistence farmers who first decide whether to be a seller and then whether to sell at the farm gate or at an off farm location before deciding on production and consumption the study tests the validity of this dual criteria model against a single criterion model in which a grower first decides to be a seller and then decides production consumption and sales location simultaneously the results suggest that the dual criteria model provides more information than the single criterion model using a sample of cassava producer in benin

custom hired tractor services and returns to scale in smallholder agriculture a production function approach historically agricultural transformation has often accompanied the increase in the returns to scale little direct evidence exists however on what actually causes such increase despite the knowledge of many factors that are associated with this increase we fill this knowledge gap by testing whether hiring in tractor services has raised returns to scale in agriculture at the household level in nepal terai that has undergone rapid growth in the tractor use through custom hiring services using switching regression and inverse probability weighted generalized method of moments we address two sources of endogeneity involved with the estimation of returns to scale 1 farmers self selection on whether to hire in tractor services and 2 use of inputs in the production function for both cobb douglas and translog production function specifications we find that hiring in tractor services significantly increased the returns to scale in agricultural production by about 0 2 0 3 among farm households not owning tractors for which suitable control groups are found findings are robust under various alternative specifications

government fertilizer subsidy and commercial sector fertilizer demand evidence from the federal market stabilization program fmsp in nigeria abstract we examine how the previous fertilizer subsidy program in nigeria fmsp affected the demand for commercial fertilizer we apply an endogenous double hurdle model to a pseudo panel and cross section data of farm households the methodology accounts for potential endogeneity of commercial fertilizer price with subsidy our specification is also appropriate where few farmers report the use of both subsidized and commercial fertilizer we find that 100 kg of subsidized fertilizer supplied to a farm household reduced the probability of its participation into commercial fertilizer market by 10 21 points while not affecting fertilizer use upon participation

supply function competition with asymmetric costs theory and experiment abstract we study a multi unit auction where bidders differ in their marginal costs and compare the outcome to the bertrand or single unit auction analogue

independent private value auctions bidder behaviour in first second and third price auctions with varying numbers of bidders the symmetric equilibrium of third price auctions is characterized it makes a number of contrasting predictions relative to firms and second price auctions bids exceed private values the marginal effects on bids of an increase in private values is greater than one increasing numbers of bidders reduces bids and risk aversion requires bidding below the risk neutral nash equilibrium in the experiment bidders do not always satisfy the point predictions of the theory however the game theoretic models correctly anticipate at least directionally the important effects of the price rule changes copyright 1993 by royal economic society

risk aversion in auctions with asymmetrically informed bidders a desensitizer from uncertainty abstract in the context of first price auctions with asymmetrically informed bidders we show that risk aversion not only increases a player s bid but also makes him less sensitive to the probability that other bidders are informed about his private valuation

games played through agents in the laboratory a test of prat rustichini s model abstract from the regulation of sports to lawmaking in parliament in many situations one group of people agents make decisions that affect the payoffs of others principals who may offer action contingent transfers in order to sway the agents decisions prat and rustichini 2003 characterize pure strategy equilibria of such games played through agents specifically they predict the equilibrium outcome in pure strategies to be efficient we test the theory in a series of experimental treatments with human principals and computerized agents the theory predicts remarkably well which actions and outcomes are implemented but subjects transfer offers deviate systematically from equilibrium we show how quantal response equilibrium accounts for the deviations and test its predictions out of sample our results show that quantal response equilibrium is particularly well suited for explaining behavior in such games

evaluation of biodiversity policy instruments what works and what doesn t w e review and confirm the claim that credible evaluations of common conservation instru ments continue to be rare the limited set of rigorous studies suggests that protected areas cause modest reductions in deforestation however the evidence base for payments for ecosystem services decentralization policies and other interventions is much weaker thus we renew our urgent call for more evaluations from many more biodiversity relevant locations specifically we call for a programme of research conservation evaluation 2 0 that seeks to measure how programme impacts vary by socio political and bio physical context to track economic and environmental impacts jointly to iden tify spatial spillover effects to untargeted areas and to use theories of change to characterize causal mechanisms that can guide the collection of data and the interpretation of results only then can we usefully contribute to the debate over how to protect biodiversity in developing countries

english auctions with resale an experimental study i design and test a simple english auction and two english auctions with resale but with different informational backgrounds all three treatments theoretically have the same equilibrium i find however that the possibility of resale alters behavior significantly in the two treatments with resale subjects deviated from both the nash prediction and the common results about bidding behavior in english auctions subjects tend to overbid when they are certain they can reap the whole surplus in the resale market i employ different models like qre and levels of reasoning and conclude that overbidding can be explained as a rational response to the noisy environment in markets with human participants that is as rational decision making when anticipating others to make errors when the outcome of the resale market is not certain there is significant signaling behavior and auction prices tend to be lower than the nash prediction

agricultural technology choice and transport this paper addresses an old and recurring theme in development economics the slow adoption of new technologies by farmers in many developing countries the paper explores a somewhat novel link to explain this puzzle the link between market access and the incentives to adopt a new technology when there are non convexities the paper develops a theoretical model to guide the empirical analysis which uses spatially disaggregated agricultural production data from spatial production allocation model and living standards measurement study survey data for nigeria the model is used to estimate the impact of transport costs on crop production the adoption of modern technologies and the differential impact on returns of modern versus traditional farmers to overcome the limitation of data availability on travel costs for much of africa road survey data are combined with geographic information road network data to generate the most thorough and accurate road network available with these data and the highway development management model minimum travel costs from each location to the market are computed consistent with the theory analysis finds that transportation costs are critical in determining technology choices with a greater responsiveness among farmers who adopt modern technologies and at times a perverse negative response to lower transport costs among those who employ more traditional techniques in sum the paper presents compelling evidence that the constraints to the adoption of modern technologies and access to markets are interconnected and so should be targeted jointly

pathways into and out of poverty a study of rural household wealth dynamics in kenya this study identifies the factors associated with smallholder farm households that have risen out of poverty or descended into poverty between 1997 and 2007 in kenya the study uses data from a nationwide balanced panel of 1 275 households and data from detailed retrospective life history survey of 84 households that had experienced either an appreciable improvement or decline in their asset wealth over the 10 year panel period the results indicate that household welfare dynamics are associated with a disparate set of idiosyncratic and unexpected shocks such as death and chronic illness demographic factors proximity to infrastructural facilities as well as intergenerational wealth transfers

marketing margins and the welfare analysis of food price shocks abstract following the surge in world food prices of 2007 2008 there has been a revival of short run household welfare analysis that seeks to understand whether food price increases are beneficial or detrimental for households for a number of reasons including lack of data in some instances the short run analytical approach has embedded an assumption of equal percentage price changes for consumers and producers this assumption implies that food marketing costs change by the same percentage because an x percent change in both farm prices and consumer prices implies that there must also be an x percent change in their difference but this paper shows that most marketing costs are fixed not proportional and further that assuming proportional marketing costs leads to a bias towards finding negative impacts of higher food prices the magnitude of the bias is shown to be greater than that from failing to incorporate supply and demand responses to price changes and can be substantial relative to the effect estimated without incorporating the bias in addition the bias is not necessarily uniform across income classes thus failure to explicitly consider marketing margins has the potential to reverse the relative magnitudes of the impact on rich and poor

credit constraints and productivity in peruvian agriculture this article evaluates the performance of a rural credit market in peru we develop a model that shows that collateral requirements imposed by lenders in response to asymmetric information can lead not just to quantity rationing but also to transaction cost rationing and risk rationing just like quantity rationing these two additional forms of nonprice rationing adversely affect farm resource allocation and productivity we test the insights of the model using a panel data set from northern peru we estimate the returns to productive endowments for constrained and unconstrained households using a switching regression model we find that consistent with the theory productivity is independent of endowments for unconstrained households but is tightly linked to endowments for constrained households we estimate that credit constraints lower the value of agricultural output in the study region by 26

spatial patterns of market participation and resource extraction fuelwood collection in northern uganda while distance to markets is a key determinant of market participation for households that are dependent on natural resources the distance to the resource stock is also essential thus a household s location with respect to markets and the resource stock determines household market participation and associated resource degradation applying a discrete choice framework for fuelwood collection in a developing country we characterize the spatial pattern of market participation regimes and forest use all else being equal autarkic households are closest to the forest and furthest from the market buyer households are closest to the market and furthest from the forest and seller households are at intermediate distances empirical tests based on survey data from northern uganda support the predictions from our theoretical model our findings have important implications for understanding the spatial patterns of forest degradation and determining the control group when designing impact evaluations of the effectiveness of development and conservation interventions

determinants of smallholder farmers participation in banana markets in central africa the role of transaction costs a bivariate probit model was employed to jointly and separately estimate banana market participation decisions of buying and selling households in rwanda and burundi using household survey data selectivity bias was corrected for estimating the transacted volumes using heckman s procedure the results showed that transaction cost related factors such as geographical location of households market information sources and travel time to the nearest urban center influence market participation non price related factors such as security of land tenure labor availability off farm income gender of the household head and years of farming experience had a significant influence on the transacted volumes output prices had a significant correlation with sales volume indicating price incentives increased supply by sellers generally the findings suggest that policies aimed at investments in rural road infrastructure market information systems collective marketing and value addition of banana products may provide a potential avenue for mitigating transaction costs and enhancing market participation and production of marketed surplus by rural households

decomposing producer price risk a policy analysis tool with an application to northern kenyan livestock markets abstract this paper introduces a simple method of price risk decomposition that determines the extent to which producer price risk is attributable to volatile inter market margins intra day variation intra week day of week variation or terminal market price variability we apply the method to livestock markets in northern kenya a setting of dramatic price volatility where price stabilization is a live policy issue in this particular application we find that large variable inter market basis is the most important factor in explaining producer price risk in animals typically traded between markets local market conditions explain most price risk in other markets in which traded animals rarely exit the region variability in terminal market prices accounts for relatively little price risk faced by pastoralists in the dry lands of northern kenya although this is the focus of most present policy prescriptions under discussion

farmer bargaining power and market information services in many sub saharan african countries farmers typically have a choice between selling their products to traders who travel between villages and markets and transporting their products to the nearest market themselves because of communities remoteness and poor communications with marketplaces farmers uncertainty about market prices is usually high traders may take advantage of farmers ignorance of the market price and extract a rent from them by offering very low prices for their products in this article we model bargaining interactions between farmers and traders meeting at the farmgate and we study how price information affects the bargain and the balance of power we show the conditions for market information services mis to be profitable for farmers and examine efficiency issues associated with asymmetric information finally we test the model s prediction that information results in positive individual gain for farmers using original survey data collected in the northern region of ghana specifically we estimate the causal effect of a mobile based mis program on farmers marketing performances and find that farmers who have benefited from the mis program received significantly higher prices for maize and groundnuts about 10 more for maize and 7 more for groundnuts than what they would have received had they not participated in the mis program these results suggest that the theoretical conditions for successful farmer use of mis may be met in the field

5 information impact and allocation rules in auctions with affiliated private values a laboratory study in affiliated private value auctions each bidder has perfect information regarding his her own value for the object at auction but higher values of the item for one bidder make higher values for other bidders more likely we report on a series of experiments examining three key implications of these auctions i in a first price auction public information about rivals values increases expected revenue ii an english auction increases expected revenue compared to a first price auction and iii a second price auction is isomorphic to an english auction in examining these issues we compare predictions of some ad hoc bidding models with nash equilibrium predictions in the first price auction experiments nash equilibrium bidding theory organizes the data better than either of two ad hoc bidding models public information about others valuations does increase average revenue but the increase in revenue is smaller and less reliable than predicted under risk neutral nash equilibrium bidding lower average revenue might be attributed to risk aversion while the high variability is attributed to a sizable frequency of individual bidding errors relative to the theory bidding theory precisely organizes english auction outcomes after a brief initial learning period the dominant strategy equilibrium does not organize second price auctions nearly as well as market prices persistently exceed predicted prices the difference between english and second price outcomes is attributed to effects of different information flows inherent in the structure of the two institutions on eliminating bidding errors revenue impacts of these two institutions relative to a first price auction are examined in light of observed bidding patterns

evidence against imposing restrictions on hurdle models as a test for simultaneous versus sequential decision making agricultural economists frequently employ hurdle models to estimate the determinants of truncated outcomes such as market participation and adoption a pervasive belief is that restrictions can be placed on hurdle models to test whether the decisions made in the underlying data generating process occurred sequentially or simultaneously this article argues against the ability to draw this conclusion and further submits there is a negative correlation between failing to reject these restrictions and sample size evidence to support both proposals comes from data collected in a natural setting as well as simulated data with a known data generating mechanism

the determinants of capital intensity in manufacturing the role of factor market imperfections summary we study the role of factor market imperfections in determining industry level capital intensities using cross country panel data on manufacturing industries we find that labor market imperfections arising from labor regulation have a greater influence on capital intensity than do credit market imperfections less restrictive labor regulations are associated with lower capital intensity in manufacturing especially in middle income and developing economies and in sectors that either require more frequent labor adjustment or are more unskilled labor intensive this suggests that stringent labor regulations can impose costs on labor use thereby curtailing gains from trade based on factor abundance driven comparative advantage

does food aid disrupt local food market evidence from rural ethiopia the paper examines the impact of food aid on households marketing behavior based on a panel of households followed during 1994 2009 in 15 villages of ethiopia the impact of aid is examined at the intensive margin on quantities produced sold or bought by the households and at the extensive margin on the number of producers sellers and buyers food aid reduces the probability of being a producer it also increases the probability of being a seller after a reform of aid policy in 2004 from repeated emergency distributions toward a multi year program aiming at agricultural development

risks and farmers investment in productive assets in nigeria the majority of farmers in sub saharan africa ssa lack the means to mitigate the impact of risks associated with rainfall and commodity prices due to capital constraints and the imperfect insurance market in these countries because most ssa farmers are risk averse they may be willing to invest in productive assets that can mitigate the impacts of such risks if their capital constraints are relaxed through external financial assistance we test this hypothesis by using panel data on investment behavior of nigerian farmers who received financial assistance on productive assets the empirical results show that farmers facing higher rainfall risks are more likely to invest in irrigation pumps that can mitigate the impact of rainfall risks while those facing higher risks of white gari price are more likely to invest in milling machines that enable them to process cassava into flour instead of gari which supports our hypothesis

welfare implications of community forest plantations in developing countries the orissa social forestry project community forest plantations are a common intervention in developing countries we use household and remote sensing data from orissa india to estimate welfare effects of community forest plantations in terms of the value of decreased collection times plantations afford users a selection model accounting for possible jointness in site location and productivity is used to estimate collection production functions for different household labor categories in natural and community forests two measures of an opportunity cost of time are used to determine welfare effects of time saved due to community forests we find access to community forests is important to marginal productivity of different labor categories but to different degrees highlighting the need to disaggregate household data when analyzing these interventions we also find substantial welfare improvements from time savings for many households and villages

the nature of information and its effect on bidding behavior laboratory evidence in a first price common value auction abstract we study in the laboratory a series of first price sealed bid auctions of a common value good bidders face three types of information private information public information and common uncertainty auctions are characterized by the relative size of these three information elements only half of our subjects bid differently depending on whether the last piece of information obtained is private or public but they do not react to each type of information as predicted by theory the other half of the subjects do not distinguish between private and public information and either consistently underbid or consistently overbid

economic impacts of marine reserves the importance of spatial behavior abstract marine biologists have shown virtually unqualified support for managing fisheries with marine reserves signifying a new resource management paradigm that recognizes the importance of spatial processes in exploited systems most modeling of reserves employs simplifying assumptions about the behavior of fishermen in response to spatial closures we show that a realistic depiction of fishermen behavior dramatically alters the conclusions about reserves we develop estimate and calibrate an integrated bioeconomic model of the sea urchin fishery in northern california and use it to simulate reserve policies our behavioral model shows how economic incentives determine both participation and location choices of fishermen we compare simulations with behavioral response to biological modeling that presumes that effort is spatially uniform and unresponsive to economic incentives we demonstrate that optimistic conclusions about reserves may be an artifact of simplifying assumptions that ignore economic behavior

peasant household behaviour with missing markets some paradoxes explained a model of peasant household behavior under varying degrees of household specific food and labor market failures is constructed to show that these structural features can explain several well known patterns of peasant response which have often been attributed to peculiar motives presumed specific to peasants the model explains sluggish response to cash crops prices and high instability in perceived food and labor scarcities the key role of manufactured consumer goods prices in stimulating peasants effort in cash crops production the effectiveness of taxation as opposed to incentives in stimulating cash crops production and the key role of technological change in food production to enhance cash crop production results are obtained analytically in the case of one market failure and by numerical simulation with more than one

soil quality and fertilizer use rates among smallholder farmers in western kenya studies of fertilizer use in sub saharan africa have been dominated by analyses of economic and market factors having to do with infrastructure institutions and incentives that prevent or foster increased fertilizer demand largely ignoring how soil fertility status conditions farmer demand for fertilizer we apply a switching regression model to data from 260 farm households in western kenya in order to allow for the possibility of discontinuities in fertilizer demand based on a soil carbon content scc threshold we find that the usual factors reflecting liquidity and quasi fixed inputs are important on high scc plots but not on those with poorer soils external inputs become less effective on soils with low scc hence the discernible shift in behaviors across soil quality regimes for many farmers improved fertilizer market conditions alone may be insufficient to stimulate increased fertilizer use without complementary improvements in the biophysical conditions that affect conditional factor demand

the integration of natural capital into development policies in response to the united nations sustainable development goals there has been a rising awareness of the need to address simultaneously the preservation of natural capital stocks and poverty alleviation at multiple scales focusing on tropical forest rich developing countries the article overviews the extent to which natural capital considerations are integrated into existing development policies and interventions the review finds that the explicit consideration of natural resources is left out of many commonly applied development interventions leading to suboptimal and unsustainable outcomes the interventions that do tackle both development and conservation goals are often not coordinated and are implemented at a site by site basis without providing the socially efficient levels of natural capital stocks or ensuring the long term sustainability of the development and conservation impacts bringing in perspectives from development economics environmental economics and applied conservation this article makes the case for a better integration of development and conservation goals in interventions in developing countries and outlines the emerging frontiers for research and policy

out of equilibrium bids in first price auctions wrong expectations or wrong bids deviations from risk neutral equilibrium bids in auctions can be related to inconsistent expectations with correct best replies or correct expectations but deviant best replies e g because of risk aversion regret quantal response mistakes to distinguish between these two explanations we use a novel experimental procedure and study expectations together with best replies in symmetric and asymmetric auctions we extensively test the internal validity of this setup we find that deviations from equilibrium bids do not seem to be because of to wrong expectations but because of deviations from a risk neutral best reply

subsidies and crowding out a double hurdle model of fertilizer demand in malawi this article uses a double hurdle model with panel data from malawi to investigate how fertilizer subsidies affect farmer demand for commercial fertilizer the article controls for potential endogeneity caused by the nonrandom targeting of fertilizer subsidy recipients results show that on average 1 additional kilogram of subsidized fertilizer crowds out 0 22 kg of commercial fertilizer but crowding out ranges from 0 18 among the poorest farmers to 0 30 among relatively nonpoor farmers this indicates that targeting fertilizer subsidies to the rural poor is likely to maximize the contribution of the subsidy program to total fertilizer use

multidimensional private value auctions we consider parametric examples of symmetric two bidder private value auctions in which each bidder observes her own private valuation as well as noisy signals about her opponent s private valuation we show that in such environments the revenue equivalence between the first and second price auctions spas breaks down and there is no definite revenue ranking while the spa is always efficient allocatively the first price auction fpa may be inefficient equilibria may fail to exist for the fpa we also show that auction mechanisms provide different incentives for bidders to acquire costly information about opponents valuation

transactions costs and agricultural household supply response we develop and estimate a model of supply response when transactions costs create a situation where some producers buy others sell and others do not participate in markets we present two rationales for why producing households may have different relationships to the market proportional and fixed transactions costs using data on mexican corn producers we estimate an empirical model that allows for separate tests of the significance of both types of transactions costs revealing that both fixed and proportional transactions costs matter for the estimation the results provide consistent estimates of supply elasticity and measures of the relative importance of factors determining both proportional and fixed transactions costs

an ordered tobit model of market participation evidence from kenya and ethiopia do rural households in developing countries make market participation and volume decisions simultaneously or sequentially this article develops a two stage econometric method to test between these two competing hypotheses regarding household level marketing behavior the first stage models the household s choice of whether to be a net buyer autarkic or a net seller in the market the second stage models the quantity bought sold for net buyers sellers based on observable household characteristics using household data from kenyan and ethiopian livestock markets we find evidence in favor of sequential decision making the welfare implications of which we discuss

the environmental impact of poverty evidence from firewood collection in rural nepal abstract we investigate determinants of household firewood collection in rural nepal using 1995 96 and 2002 3 world bank living standards measurement survey lsms data we incorporate village fixed effects endogenous censoring measurement error in living standards and heterogeneous effects of different household assets we find no evidence in favor of the poverty environment hypothesis the evidence for the environmental kuznets curve depends on the precise measure of living standards and time period studied firewood collections fall with a transition to modern occupations and rise with increasing population and household division the local interhousehold collection externality is negligible indicating that policy interventions are justified only by ecological considerations or nonlocal spillovers

price dynamics in biological production processes exposed to environmental shocks this paper demonstrates a mechanism by which environmental shocks in biological production processes can lead to extreme price movements and thus be a contributing factor to short term food price volatility in biological production processes environmental shocks can lead to a stock out when the harvest transitions to a new stock year class with a different marginal value the result in the market is a temporary price spike or bubble bounded by the marginal value of the new stock we highlight this phenomenon in a cohort or year class biological production setting each year class in the model is a finite non renewable capital stock and capital theory is used to solve for the stochastic dynamic competitive equilibrium the model is parameterized to be representative of the norwegian salmon aquaculture industry results suggest that the model can replicate much of the observed patterns in price harvest and capital stock dynamics including the infrequent occurrence of extremely high prices in the market

institutional quality and international trade institutions quality of contract enforcement property rights shareholder protection and the like have received a great deal of attention in recent years yet trade theory has not considered the implications of institutional differences beyond treating them simply as different technologies or taxes the purpose of this paper is twofold first we propose a simple model of international trade in which institutional differences are modeled within the framework of incomplete contracts we show that doing so reverses many of the conclusions obtained by equating institutions with productivity institutional differences as a source of comparative advantage imply among other things that the less developed country may not gain from trade and factor prices may actually diverge as a result of trade second we test empirically whether institutions act as a source of trade using data on us imports disaggregated by country and industry the empirical results provide evidence of institutional content of trade institutional differences are an important determinant of trade flows

effect of off farm income on smallholder commercialization panel evidence from rural households in ethiopia this article investigates how off farm income affects crop output market participation decisions and marketed surplus of smallholder farmers in ethiopia a double hurdle model is estimated using three waves of panel data from the ethiopian rural household survey unobserved heterogeneity is controlled for using a correlated random effect procedure and potential endogeneity of explanatory variables using a control function approach the results show that off farm income has no significant influence on household crop output market participation however conditional on market participation additional off farm earnings negatively affect the marketed surplus this indicates that farmers use off farm earnings for consumption rather than for investment in agricultural production policy measures that promote rural investment may help increase returns to labor for land poor households participating in off farm work in the process of agricultural commercialization

semiparametric estimation of first price auctions with risk averse bidders in view of the non identification of the first price auction model with risk averse bidders this paper proposes some parametric identifying restrictions and a semiparametric estimator for the risk aversion parameter s and the latent distribution of private values specifically we exploit heterogeneity across auctioned objects to establish semiparametric identification under a conditional quantile restriction of the bidders private value distribution and a parameterization of the bidders utility function we develop a multistep semiparametric method and we show that our semiparametric estimator of the utility function parameter s converges at the optimal rate which is slower than the parametric one but independent of the dimension of the exogenous variables thereby avoiding the curse of dimensionality we then consider various extensions including a binding reserve price affiliation among private values and asymmetric bidders the method is illustrated on u s forest service timber sales and bidders risk neutrality is rejected

the regulation of labor author s botero juan djankov simeon la porta rafael lopez de silanes florencio shleifer andrei abstract we investigate the regulation of labor markets through employment collective relations and social security laws in 85 countries we find that the political power of the left is associated with more stringent labor regulations and more generous social security systems and that socialist french and scandinavian legal origin countries have sharply higher levels of labor regulation than do common law countries however the effects of legal origins are larger and explain more of the variation in regulations than those of politics heavier regulation of labor is associated with lower labor force participation and higher unemployment especially of the young these results are most naturally consistent with legal theories according to which countries have pervasive regulaory styles inherited from the transplantation of legal systems

nonlinear behavior in sealed bid first price auctions the extent to which the behavior of people is consistent with game theoretic principles is investigated in a first price sealed bid auction environment three linear rules of thumb with increasing complexity are used as benchmarks to gauge the accuracy of the constant relative risk aversion model crram in addition the crram is tested against the relaxation of the rational expectation hypothesis existing competitive bidding experiments cannot clearly distinguish between game theoretic models and linear markdown rules on an individual level within the parametric environments studied and reported in the experimental literature game theoretic solutions are linear over the range of private values in which bid functions are estimated in this study agents drew values from non uniform distributions as a result the game theoretic bidding behavior is nonlinear due to the nonlinearity special econometric and numerical techniques are applied to solve the model and obtain the estimates the crram exhibits good fit of the data the pseudo r2 is greater than 0 8 in 90 percent of the subjects the crram is more accurate than the markdown model mm and the simple ad hoc model simam but not as accurate as the sophisticated ad hoc model sop am the data also supports the relaxation of the rational expectation hypothesis and suggests that substantial increases in the predictive power of game theoretic models can be gained from improvements in the theory of belief formation

a triple hurdle model of production and market participation in kenya s dairy market existing analyses of market participation are based on a double hurdle modeling approach such models are appropriate only when all members of the population of interest actually produce the good in some contexts however e g smallholder farmers many members of the population do not produce particular goods that they could produce and that their neighbors do produce policies influencing market participation among producers may thus also induce additional farmers to become producers previous double hurdle approaches do not allow explicitly for this possibility to address these limitations this article presents a triple hurdle approach with an initial stage that includes nonproducers the model is used to identify the factors associated with kenyan smallholder farmers choosing to participate in dairy production and the role that these producers choose to play or not in the marketplace in the midst of debates underway over the privatization of the parastatal kenya creameries company new knowledge about smallholder participation in dairy could be an important contribution results suggest the importance of rural electrification training and improved grazing practices we find that expected net sales are significantly higher when farmers have access to informal private markets we also describe a version of the ordered tobit model that includes nonproducers and is nested in our triple hurdle model a likelihood ratio test shows the latter to be a significantly better fit to our data we discuss how insights gained from this study differ from the insights that would come from a double hurdle ordered tobit that also includes nonproducers

transaction costs information technologies and the choice of marketplace among farmers in northern ghana using a transactions costs framework we examine the impact of information and communication technologies mobile phones and radios use on market participation in developing country agricultural markets using a novel transaction level data set of ghanaian farmers our analysis of the choice of markets by farmers suggests that market information from a broader range of markets may not always induce farmers to sell in more distant markets instead farmers may use broader market information to enhance their bargaining power in closer markets finally we find weak evidence on the impact of using mobile phones in attracting farm gate buyers

look who s talking the impacts of the intrahousehold allocation of mobile phones on agricultural prices abstract using data from the philippines we study the impact of mobile phones on the prices agricultural producers receive for their cash crop we first look at the impact on price of mobile phone ownership at the household level because this masks a considerable amount of heterogeneity we then look at the impact on price of the intrahousehold allocation of mobile phones we find that whether the household owns a mobile phone has no impact on price but whether a farmer or spouse owns a mobile phone is associated with a 5 to 8 per cent increase in price

implementing efficient multi object auction institutions an experimental study of the performance of boundedly rational agents abstract we study three alternative implementations of the vickrey multi unit demand auction vickrey s original static sealed bid auction and two dynamic ausubel auctions with and without public dropout information reported during the auction although implemented by a weaker solution concept behavior in the dynamic vickrey auction with the public dropout information comes significantly closer to the theoretical prediction of sincere bidding bidding one s valuations than either the static vickrey auction or the dynamic auction without dropout information this suggests a possible tradeoff between the simplicity and transparency of a mechanism and the strength of its solution concept when agents are still learning and or when players are not fully rational drawing on results from related single unit and multi unit demand auctions and the results of a new single unit demand auction experiment we provide important insights into the behavioral mechanism underlying the superior performance of the ausubel auction with feedback information

market facilities and agricultural marketing evidence from tamil nadu india this article analyzes the effect of facilities and infrastructure available at the marketplace on a farmer s decision to sell at the market the econometric estimation shows that the likelihood of sales at the market increases significantly with an improvement in market facilities and a decrease in travel time from the village to the market the results suggest that wealth reduces a farmer s cost of accessing market facilities more than it increases her his opportunity cost of leisure the policy simulation indicates that the marginal benefits from an improvement in market facility will favor the poorer farmers in the context of india

a century long perspective on agricultural development this article strategically surveys the past century s literature on agricultural development we organize the discussion around three grand themes that reveal the richness of agricultural development as an intellectual endeavor first we explore the role of agriculture in the broader development process from a macroeconomic and political economy perspective we then examine the role of technological and institutional change in successful agricultural development finally the focus turns to a microeconomic perspective on agricultural household decision making and the problems of imperfect and missing markets asymmetric information and transactions costs that lead to widespread apparent inefficiency and disequilibrium

resolving uncertainty about the number of bidders in independent private value auctions an experimental analysis results from first price sealed bid auctions in which there is uncertainty regarding the number of bidders are reported consistent with recent theoretical findings concealing information regarding the number of bidders raises more revenue for the seller than revealing information individual bids show that 1 narrowly interpreted the nash equilibrium bidding theory underlying these theoretical predictions is rejected as less than 50 of all bids satisfy the strict inequality requirements of the theory but 2 a majority of the deviations from these inequality requirements favor the revenue raising predictions of the nash model and in a large number of cases involve marginal violations of the theory

why does on farm storage fail to mitigate price volatility we analyze the role of farm stock management on price volatility under liquidity constraints and heterogeneous price expectations in commodity markets speculative behaviors by stockholders tend to reduce price volatility but this is not the case in certain agricultural markets where speculation by farmers regarding decisions to sell or store grain are subject to liquidity constraints and heterogeneous price expectations like stockholders most farmers sell grain if they expect a price drop in the near future but unlike stockholders they are not necessarily able to purchase grain if they expect a price increase in the next period heterogeneous price expectations can also lead to suboptimal storage decisions further increasing price volatility for these reasons the storage management behavior of farmers often fails to mitigate price drops in the way that speculation by stockholders does we merge historical data on maize prices and household storage collected in burkina faso in order to build a dynamic panel over the 2005 2012 period we show that carry over from one season to the next is associated with unexpected price drops during the preceding lean season and that carry over is associated with more frequent unexpected price drops following the subsequent post harvest season this article is protected by copyright all rights reserved

the spite motive in third price auctions a spiteful agent losing an auction experiences negative emotions towards the winner in line with previous experimental findings i show that the symmetric equilibrium bid of a spiteful agent in third price auctions is higher than the risk neural nash equilibrium bid furthermore it can be shown that spiteful agents bid the same way agents would who anticipate to regret their decision in equilibrium

linking smallholder farmers to markets on extensive and intensive margins evidence from nicaragua abstract access to modern commercialization channels is key for smallholder farmers to move away from subsistence farming and overcome poverty however achieving that goal is challenging for smallholders given their lack of appropriate managerial practices production technology and infrastructure this paper examines the association between receiving trainings in two distinct entrepreneurial practices one direct at the individual and farmer association level and another indirect at the community level and commercialization in non local markets at the extensive and intensive margins we exploit a panel dataset of bean producers in nicaragua that participated in an ngo program implemented between 2007 and 2012 we find opposite results for the two market linkage activities especially on the intensive margin or volume of sales while reciving direct training on entrepreneurial practices ep is positively associated with commercialization training on municipality engagement me activities is negatively associated these correlation patterns are mainly observed among entrant farmers as opposed to those already participating in commercial markets prior to the program implementation we also find varying results for me activities by plot size and leadership position additional estimations show that training activities that are positively correlated with bean commercialization are not necessarily correlated with the commercialization of other crops and vice versa

shocks and their consequences across and within households in rural zimbabwe abstract increasing attention is now being paid to poverty dynamics in developing countries this work links the extent to which households smooth consumption or smooth assets given income shocks the empirical evidence on the churning of households in and out of poverty and the possibility that temporary shocks can have permanent consequences using longitudinal data from rural zimbabwe this paper extends the discussion of these issues by disaggregating the impact of shocks by levels of asset holdings by disaggregating the impact of shocks on individual level welfare and by assessing the extent to which such shocks have permanent consequences by doing so it assesses the validity of distinguishing between asset and consumption smoothing and provides insights into whether poverty dynamics assessed at the household level provide an adequate picture of dynamics at the individual level

stochastic wealth dynamics and risk management among a poor population we use herd history data collected among pastoralists in southern ethiopia to study stochastic wealth dynamics among a poor population although covariate rainfall shocks plainly matter household specific factors including own herd size account for most observed variability in wealth dynamics we find no support for the tragedy of the commons hypothesis past studies may have conflated costly self insurance with stocking rate externalities biophysical shocks move households between multiple dynamic wealth equilibria the lowest suggesting a poverty trap according to nonconvex path dynamics these findings have broad implications for development and relief strategies among a poor population vulnerable to climatic shocks a vast economic literature on risk management rests explicitly or implicitly on the classic friedmanite permanent income hypothesis studies of portfolio management consumption smoothing social insurance and the like all depend on the canonical assumption that stochastic income realisations are drawn from a stationary income distribution leading to consumption smoothing off a stable asset base the possibility of asset accumulation connects this literature to the immense literature on the theory and empirics of economic growth

all pay auctions and group size grading on a curve and other applications we model contests with a fixed proportion of prizes such as a grading curve as all pay auctions where higher effort weakly increases the likelihood of a prize we find theoretical predictions for the heterogeneous effect auction size has on effort from high and low types we test our predictions in a laboratory experiment that compares behavior in two bidder one prize auctions with behavior in 20 bidder 10 prize auctions we find a statistically significant 11 8 increase in aggregate bidding when moving from the small to large auction the impact is heterogeneous as the auction size increases low types decrease effort but high types increase effort additionally the larger auction provides a stronger rank correlation between effort and ability awarding more prizes to the higher skilled and improving the efficiency of prize allocation

cognitive ability and bidding behavior in second price auctions an experimental study behavioral biases are more pronounced for individuals with lower cognitive abilities this paper examines what connection if any there is between cognitive ability and bidding strategy in second price auctions despite truthful revelation being a weakly dominant strategy previous experiments have consistently observed overbidding which makes use of such auctions for inferring homegrown value problematic examining the effect of cognitive ability is important as it may help identify when one can reliably recover values from bids the results indicate that more cognitively able subjects behave in closer accordance with theory and that cognitive ability partially explains heterogeneity in bidding behavior

asymmetric information about rivals types in standard auctions an experiment this paper studies experimentally how information about rivals types affects bidding behavior in firstand second price auctions the comparative static hypotheses associated with information about rivals enables us to test the relevance of such information as well as the general predictions of the auction theory by providing an effective means to control for risk aversion and other behavioral motives that were difficult to control for in previous experiments our experimental evidence provides strong support for the theory and sheds light on the roles of risk aversion and the spite motive in first and second price auctions respectively

are kenyan farmers under utilizing fertilizer implications for input intensification strategies and research abstract it is widely perceived that african farmers are under utilizing inorganic fertilizer however very little long term evidence from farmers fields accounting for variations in agro ecological conditions has been assembled to back this claim or determine the conditions under which it is true using five waves of nationwide household survey data from kenya covering 13 years we estimate the relative and absolute profitability of nitrogen application rates on maize fields and compare these profitability conditions to observed nitrogen use patterns over time in general we find that farmers are consistently and steadily increasing towards risk adjusted economically optimal rates of fertilizer application over time and that in the most agriculturally productive areas farmers application rates on maize sometimes exceed rates that maximize profitability fertilizer use rates may nevertheless be profitably raised in these areas but doing so will require the adoption of complementary inputs and management practices that raise maize response rates to fertilizer application this motivates a more holistic approach to input intensification strategies in the region

credit market imperfections and the distribution of policy rents this article shows that credit market imperfections have important implications for the distribution of policy rents in a model with land as fixed factor and credit market imperfections when an area payment is given land rents go up by more than the subsidy on aggregate farms may lose from the subsidy the results depend on the extent to which subsidies have direct and indirect effects on the credit constraints on whether farms rent or own land and on farm heterogeneity

bertrand without fudge abstract this paper reexamines bertrand competition with homogeneous products and different marginal costs it is shown that the conventional outcome is supported by an equilibrium in the original game under the standard rationing rule

theoretical and experimental analysis of auctions with negative externalities abstract we investigate a private value auction in which a single entrant on winning imposes a negative externality on two regular bidders in an english auction when all bidders are active regular bidders free ride exiting before price reaches their values in a first price sealed bid auction incentives for free riding and aggressive bidding coexist limiting free riding compared to the english auction we find substantial though incomplete free riding in the clock auction in first price auctions regular bidders bid more aggressively than the entrant and both bid higher than in auctions with no externality predictions regarding revenue efficiency and successful entry between the two auctions are satisfied

a selectivity model of household food marketing behavior in sub saharan africa the agricultural household s discrete decision of whether to participate in coarse grain markets is separated here from the continuous decision of how much to sell or buy conditional on participation failure to participate in markets results from high fixed transactions costs a selectivity model endogenously switches households into alternative market participation states correcting for bias caused by the exclusion of unobservable variables affecting both discrete and continuous decisions improved market information increases the probability of participation by sellers while access to cereals processing technology increases quantities transacted by both sellers and buyers conditional on participation

buyer power and intrabrand coordination we analyze the competitive effects of vertical contracts in a contracting situation where rival retailers offer contracts to a manufacturer in contrast to bernheim and whinston 1998 who study the situation in which competing manufacturers offer contracts to a common retailer we find that two part tariffs even if contingent on exclusivity or not do not suffice to implement the monopolyoutcome richer arrangements including e g conditional fixed fees and upfront payments are thus required to internalize all contracting externalities the welfare implications are ambiguous on the one hand richer contracts ensure that no efficient retailer is excluded on the other hand they allow firms to maintain monopoly prices despite intrabrand competition simulations suggest that the latter effect may be more significant

the heckman correction for sample selection and its critique this paper gives a short overview of monte carlo studies on the usefulness of heckman s 1976 1979 two step estimator for estimating selection models such models occur frequently in empirical work especially in microeconometrics when estimating wage equations or consumer expenditures it is shown that exploratory work to check for collinearity problems is strongly recommended before deciding on which estimator to apply in the absence of collinearity problems the full information maximum likelihood estimator is preferable to the limited information two step method of heckman although the latter also gives reasonable results if however collinearity problems prevail subsample ols or the two part model is the most robust amongst the simple to calculate estimators

does adaptation to climate change provide food security a micro perspective from ethiopia we examine the driving forces behind farmers decisions to adapt to climate change and the impact of adaptation on farmers food production we investigate whether there are differences in the food production functions of farm households that adapted and those that did not adapt we estimate a simultaneous equations model with endogenous switching to account for the heterogeneity in the decision to adapt or not and for unobservable characteristics of farmers and their farm we compare the expected food production under the actual and counterfactual cases that the farm household adapted or not to climate change we find that the group of farm households that adapted has systematically different characteristics than the group of farm households that did not adapt the relationship between production and average temperature is inverted u shaped for farm households that adapted while it is u shaped for farm households that did not adapt and vice versa in the case of precipitation we find that adaptation increases food production however the impact of adaptation on food production is smaller for the farm households that actually did adapt than for the farm households that did not adapt in the counterfactual case that they adapted