pro poor targeting and accountability of local governments in west bengal a commonly alleged pitfall of decentralization is that poverty socio economic inequality and lack of political competition allow local elites to capture local governments this hypothesis is empirically examined using a longitudinal sample of 89 west bengal villages concerning targeting of credit agricultural input kits employment programs and fiscal grants spanning the period 1978 98 higher poverty land inequality and low caste composition of the poor was associated with negligible adverse effects on targeting of private goods to the poor within villages but with lower employment generation out of allotted funds and significantly lower allocation of resources to the village as a whole political competition or literacy levels among the poor were not systematically related to targeting

determinants of redistributive politics an empirical analysis of land reforms in west bengal india we investigate political determinants of land reform implementation in the indian state of west bengal using a village panel spanning 1974 1998 we do not find evidence supporting the hypothesis that land reforms were positively and monotonically related to control of local governments by a left front coalition vis vis the right centrist congress party combined with lack of commitment to policy platforms instead the evidence is consistent with a quasi downsian theory stressing the role of opportunism reelection concerns and electoral competition jel d72 013 017 q15

planning under incomplete information and the ratchet effect abstract central planning of production is usually performed under asymmetric information the firm in general has more information about its productive possibilities than the central planner from now on for short cp this justifies the use of incentives schemes in which the cp does not directly fix activity levels casual observation of such existing schemes suggests that the time dimensions is crucial for their working typically the cp revises the incentive scheme over time to take into account the information provided by the firm s performance managers of centrally planned economies as well as economists have long recognized that this revision induces firms to underproduce in order to avoid demanding schemes in the future this is the ratchet effect it is purpose of the present paper to study the ratchet effect under the non commitment assumption which we believe to be more realistic the inadequacy of conceptual tools made if difficult in the past to consider such an assumption now basic research on dynamic games with incomplete information recently resulted in new ideas which look particularly relevant for a theoretical analysis of the problem

breaking up a research consortium inter firm r d collaborations through contractual arrangements have become increasingly popular but in many cases they are broken up without any joint discovery we provide a rationale for the breakup date in r d collaboration agreements more specifically we consider a research consortium initiated by a firm a with a firm b b has private information about whether it is committed to the project or a free rider we show that under fairly general conditions a breakup date in the contract is a second best optimal screening device for firm a to screen out free riders with the additional constraint of renegotiation proofness a can only partially screen out free riders entry by some free riders makes sure that a does not have an incentive to renegotiate the contract ex post we also propose empirical strategies for identifying the three likely causes of a breakup date adverse selection moral hazard and project non viability

unforeseen contingencies and incomplete contracts we scrutinize the conceptual framework commonly used in the incomplete contract literature this literature usually assumes that contractual incompleteness is due to the transaction costs of describing or of even foreseeing the possible states of nature in advance we argue however that such transaction costs need not interfere with optimal contracting i e transaction costs need not be relevant provided that agents can probabilistically forecast their possible future payoffs even if other aspects of the state of the nature cannot be forecast in other words all that is required for optimality is that agents be able to perform dynamic programming an assumption always invoked by the incomplete contract literature the foregoing optimality result holds very generally provided that parties can commit themselves not to renegotiate moreover we point out that renegotiation may be hard to reconcile with a framework that otherwise presumes perfect rationality however even if renegotiation is allowed the result still remains valid provided that parties are risk averse

dynamic contracting under adverse selection and renegotiation abstract we study the effects of renegotiation in an infinitely repeated screening model with long term contracts we propose a simple and tractable recursive formulation to study equilibria in which the monopolist s profit is maximized after every history we show that the monopolist sequentially screens high type consumers and characterize second degree price discrimination policies the monopolist s ability to extract rent from high type consumers by distorting the allocation of low type consumers vanishes as all parties become more patient as a result all distortions disappear and the allocation becomes efficient

state led or market led green revolution role of private irrigation investment vis a vis local government programs in west bengal s farm productivity growth this paper estimates respective roles of private investments in irrigation and local government programs land reforms extension services and infrastructure investments in the growth of farm productivity in west bengal india between 1981 95 using a farm panel from a stratified random sample of farms from major agricultural districts of west bengal we find evidence that private investment in irrigation which reduced irrigation costs for farms played an important role in the growth process however the growth in private investment was itself stimulated by tenancy registration and minikit distribution programs implemented by local governments this channel helps account for the substantial spillover effects of the tenancy reform on non tenant farms noted in an earlier study hence the observed productivity growth was a result of complementarity between private investment incentives and state led institutional reforms

optimal regulation of network expansion we model the optimal regulation of continuous irreversible capacity expansion where a regulated firm has private information about capacity costs investments are financed from the firm s cash flows and demand is stochastic the optimal mechanism can be implemented as a revenue tax that increases with the level of the price cap if the asymmetric information has large support then the optimal mechanism consists of a laissez faire regime for low cost firms that is the firm s price cap corresponds to that of an unregulated monopolist and it is not taxed this maximal distortion at the top is necessary to provide information rents as direct subsidies are not feasible

inequality control rights and rent seeking sugar cooperatives in maharashtra this paper presents a theory of rent seeking within farmer cooperatives in which inequality of asset ownership affects relative control rights of different groups of members the two key assumptions are constraints on lump sum transfers from poorer members and disproportionate control rights wielded by wealthier members transfers of rents to the latter are achieved by depressing prices paid for inputs supplied by members and diverting resulting retained earnings the theory predicts that increased heterogeneity of landholdings in the local area causes increased inefficiency by inducing a lower input price and a lower level of installed crushing capacity predictions concerning the effect of the distribution of local landownership on sugarcane price capacity levels and participation rates of different classes of farmers are confirmed by data from nearly 100 sugar cooperatives in the indian state of maharashtra over the period 1971 93

contracting with imperfect commitment and noisy communication abstract this paper provides new analytical tools for studying principal agent problems with adverse selection and limited commitment by allowing the principal to use general communication devices we overcome the literature s common but overly restrictive focus on one shot direct communication in addition general communication devices solve two fundamental problems of contracting with imperfect commitment first they allow us to identify the local downward incentive constraints as the relevant ones if the agent s preferences satisfy a single crossing property second we show how one may restrict the cardinality of the message spaces of the communication device an example illustrates our arguments and the suboptimality of one shot direct communication

separation of regulators against collusive behavior we show that the separation of powers in regulation may act as a commitment against the threat of regulatory capture splitting regulatory tasks and monitoring technologies among several nonbenevolent regulators may reduce their discretion in engaging in socially wasteful activities when regulators make collusive offers that are accepted by the agent whatever his characteristics competition between regulators relaxes collusion proofness constraints and improves social welfare this result is robust to different specifications of the agent s preferences and to the timing of the game as long as one insists on safe side contracting offers we also discuss how separation affects both allocative efficiency and the distribution of rents in the economy

comparative statics of the optimal dynamic incentive contract abstract each period a firm must carry out an indivisible project the cost of which depends on the firm s constant efficiency and its variable level of effort only the cost is observed by the regulator who has to choose the incentive scheme the optimal dynamic mechanism is derived under possible commitment of the regulator over time then under non commitment it is shown that there are four types of continuation equilibria also the profile of effort levels is compared to the commitment case finally some numerical comparative statics is performed and it is shown that all types of equilibria can be optimal

renegotiation and information revelation over time the case of optimal labor contracts the paper analyzes the issue of commitment in grossman and hart s model of optimal labor contracts under asymmetric information about firm profitability we extend their framework by allowing employment to vary over time at equidistant intervals when both parties can precommit ex ante not to renegotiate the contract this replicates the grossman hart outcome each subperiod when precommitment is not possible information revealed through the contract can create pareto improving renegotiation opportunities and the issue of optimal information revelation arises the paper analyzes the impact of ex post pareto improving renegotiations on the optimal contract

learning by doing and learning from others human capital and technical change in agriculture household level panel data from a nationally representative sample of rural indian households describing the adoption and profitability of high yielding seed varieties hyvs associated with the green revolution are used to test the implications of a model incorporating learning by doing and learning spillovers the estimates indicate that i imperfect knowledge about the management of the new seeds was a significant barrier to adoption ii this barrier diminished as farmer experience with the new technologies increased iii own experience and neighbors experience with hyvs significantly increased hyv profitability and iv farmers do not fully incorporate the village returns to learning in making adoption decisions

contract negotiation and the coase conjecture a strategic foundation for renegotiation proof contracts what does contract negotiation look like when some parties hold private information and negotiation frictions are negligible this paper analyzes this question and provides a foundation for renegotiation proof contracts in this environment the model extends the framework of the coase conjecture to situations in which the quantity or quality of the good is endogenously determined and to more general environments in which preferences are nonseparable in the traded goods as frictions become negligible all equilibria converge to a unique outcome which is separating efficient and straightforward to characterize

testing between competing models of sharecropping the marshallian approach assumes a prohibitively high cost of monitoring the sharecropper s activities while the monitoring approach argues that landlords stipulate and effectively monitor sharecroppers activities i present new evidence using detailed data collected from eight indian villages most tenants own some land of their own this provides a controlled environment in studying the impact of contractual arrangements the differences in input and output intensities on owned minus sharecropped land of the same household are found to be sizable and significant suggesting a rejection of the monitoring approach and supporting the notion of the marshallian productive inefficiency of sharecropping

adverse selection and renegotiation in procurement as was shown by dewatripont optimal long term contracts are generally not sequentially optimal the parties ex post renegotiate them to their mutual advantage this paper fully characterizes the equilibrium of a simple two period procurement situation and studies the extent to which renegotiation reduces ex ante welfare i a central result is that like in the non commitment case the second period allocation is optimal for the principal conditionally on his posterior beliefs about the agent ii the first period allocation exhibits an increasing amount of pooling when the discount factor grows iii with a continuum of types it is never optimal to induce full separation the paper also analyzes whether renegotiated long term contracts yield outcomes resembling those under either unnegotiated long term contracts or a sequence of short term contracts and it links the analysis with the multiple unit durable good monopoly problem

contract design and non cooperative renegotiation abstract we study a contract design setting in which the contracting parties cannot commit not to renegotiate previous contract agreements in particular we characterize the outcome functions that are implementable for an uninformed principal and an informed agent if having observed the agent s contract choice the principal can offer a new menu of contracts in its place an outcome function can be implemented in this setting if and only if it is optimal for the principal for some belief over agent types which is more pessimistic in the sense of the likelihood ratio order than the prior furthermore the outcome function cannot be too sensitive to variations in the agent s type we show that the direct revelation mechanism which implements such a function when renegotiation can be prevented will also implement it in any equilibrium when it cannot so the standard contract is robust to renegotiation

does sharecropping affect long term investment evidence from west bengal s tenancy reforms in india land reform has been high on the political agenda since independence in 1947 and early efforts at abolishing intermediaries are widely credited with having brought about significant social benefits the most prominent type is tenancy reform as it does not extinguish landlords ownership rights tenants who may have benefited from rent ceilings and cannot be evicted still have to pay annual share rent this weakness of rights may fail to create the incentives for effort supply and long term investment that have underpinned the success of land reforms elsewhere effectively adding a dynamic inefficiency to the disincentives created by the marshallian inefficiency of sharecropping this could imply that despite the high political price of implementing land reform in india the schemes so far have failed to reach their productivity and poverty reduction potential

contract renegotiation and coasian dynamics consider a long term relationship between a seller and a buyer whose valuation for a per period service or a durable good is private as trade progresses the valuation will be partially revealed and it may be impossible for the parties to commit ex ante not to take advantage of this we analyse this situation first by supposing that the parties can sign a sequence of short term contracts and secondly by supposing that they can sign a long term contract but cannot commit not to renegotiate it later we find a close relationship in the second case between the optimal long term contract and the non commitment outcome in the standard coasian durable good model our results also have implications for hidden information principal agent models

contracting with imperfect commitment and the revelation principle the single agent case this paper extends the revelation principle to environments in which the mechanism designer cannot fully commit to the outcome induced by the mechanism we show that he may optimally use a direct mechanism under which truthful revelation is an optimal strategy for the agent in contrast with the conventional revelation principle however the agent may not use this strategy with probability one our results apply to contracting problems between a principal and a single agent by reducing such problems to well defined programming problems they provide a basic tool for studying imperfect commitment

imperfect commitment and the revelation principle the multi agent case with transferable utility abstract bester and strausz bester h strausz r 2001 contracting with imperfect commitment and the revelation principle the single agent case econometrica 69 1077 1098 showed that the revelation principle is invalid in a multi agent no commitment setting we show that if transfers are possible it does apply in their setting unless at least two agents have private information

mediation and peace this article applies mechanism design to the study of international conflict resolution standard mechanisms in which an arbitrator can enforce her decisions are usually not feasible because disputants are sovereign entities nevertheless we find that this limitation is inconsequential despite only being capable of making unenforceable recommendations mediators can be equally effective as arbitrators by using recommendation strategies that do not reveal that one player is weak to a strong opponent a mediator can effectively circumvent the unenforceability constraint this is because these strategies make the strong player agree to recommendations that yield the same payoff as arbitration in expectation this result relies on the capability of mediators to collect confidential information from the disputants before making their recommendations simple protocols of unmediated communication cannot achieve the same level of ex ante welfare as they preclude confidentiality

timing of verification procedures monitoring versus auditing abstract this paper studies the strategic effect of a difference in timing of verification in an agency model a principal may choose between two equally efficient verification procedures monitoring and auditing under auditing the principal receives additional information due to a double moral hazard problem there exists a tension between incentives for effort and incentives for verification auditing exacerbates this tension and consequently requires steeper incentive schemes than monitoring hence auditing is suboptimal if 1 steep incentives structures are costly to implement due to bounded transfers or 2 steep incentive schemes induce higher rents due to limited liability

optimal information transmission in a holdup problem this article examines the optimal contract in a bilateral trade model with unobservable relationship specific investment and renegotiation in such a setting a contract plays an additional role that it does not have in the standard holdup model namely that of transmitting information between the parties the article shows that a partial disclosure contract may be optimal and describes the optimal contract if the investment is cooperative and the information between the trading parties is asymmetric the optimal contract generally cannot result in the first best but dispensing with either of these assumptions makes the first best achievable

competitive markets without commitment in the presence of a time inconsistency problem with agency contracts we show that competitive markets can implement allocations that pareto dominate those achieved by a benevolent government and they induce more effort we analyze a model with moral hazard and a two sided lack of commitment after agents have chosen their work firms can modify contracts and agents can switch firms if the ex post market outcome satisfies a weak notion of competitiveness and sufficiently separates individuals it is pareto superior to a government s allocation with a complete breakdown of incentives moreover competitive markets without commitment implement more effort in equilibrium under general conditions

empowerment and efficiency tenancy reform in west bengal the paper analyzes the effect of agricultural tenancy laws offering security of tenure to tenants and regulating the share of output that is paid as rent on farm productivity theoretically the net impact of tenancy reform is shown to be a combination of two effects a bargaining power effect and a security of tenure effect analysis of evidence on how contracts and productivity changed after a tenancy reform program was implemented in the indian state of west bengal in the late 1970s suggests that tenancy reform had a positive effect on agricultural productivity there

optimal regulation of energy network expansion when costs are stochastic abstract we analyze optimal regulation of the gradual investments in energy networks necessary to accommodate the energy transition we focus on a real option problem where costs of new network technology are stochastic and not observable to the regulator we solve for the regulatory scheme that optimally balances timely investments with rent extraction in this dynamic agency context we then apply this methodology to a situation in which investment can be either in traditional network technology with observable costs or using an innovative network technology for which there is asymmetric information on costs the optimal choice trades off the potential benefits of cheaper expansion with the costs of overcoming information frictions