HOW IMPORTANT ARE ENDOGENOUS PEER EFFECTS IN GROUP LENDING? ESTIMATING A STATIC GAME OF INCOMPLETE INFORMATION

We quantify the importance of endogenous peer effects in group lending programs by estimating a static game of incomplete information. Endogenous peer effects describe how one's behavior is affected by the behavior of her peers. Using a rich dataset from a group lending program in India, our empirical analysis presents a robust finding of large peer effects. The preferred model suggests that the probability of a member making a full repayment would be 12 percentage points higher if all the fellow members were to make full repayment compared with a scenario in which none of the other members repay in full. We find that peer effects would be overestimated without controlling for unobserved group heterogeneity and that inconsistencies exist in the estimated effects of other variables without modeling peer effects and unobserved heterogeneity. Copyright © 2012 John Wiley & Sons, Ltd.     

Impacts of Low-Cost Land Certification on Investment and Productivity

New land reforms are again high on the policy agenda and low-cost, propoor reforms are being tested in poor countries. This article assesses the investment and productivity impacts of the recent low-cost land certification implemented in the Tigray region of Ethiopia, using a unique household and farm-plot-level panel data set, with data from before and up to eight years after the reform. Alternative econometric methods were used to test and control for endogeneity of certification and for unobserved household heterogeneity. Significant positive impacts were found, including effects on the maintenance of soil conservation structures, investment in trees, and land productivity.     

Land Sales and Rental Markets in Transition: Evidence from Rural Vietnam*

Impact and desirability of land transfers in post‐socialist‐transition economies have been subject of considerable debate. We use data from Vietnam to identify factors conducive to the development of land markets and to assess potentially differential impacts of rental and sales. Results show that both rental and sales transfer land to more productive producers but that rental is more important for the poor to access land that becomes available as the non‐farm economy develops. The fact that secure land rights significantly increase supply of land to the rental market suggests that government has a key role in facilitating emergence and functioning of efficiency‐enhancing land markets.     

Efficiency and equity impacts of rural land rental restrictions: Evidence from India

Recognition of the potentially deleterious implications of inequality in opportunity originating in a skewed asset distribution has spawned considerable interest in land reforms. However, little attention has been devoted to the fact that, in the longer-term, the measures used to implement land reforms, especially rental restrictions, could negatively affect productivity. Use of state level data on rental restrictions, together with a nationally representative survey from India suggests that, contrary to original intentions, rental restrictions negatively affect productivity and equity by reducing scope for efficiency-enhancing rental transactions that benefit poor producers. Simulations suggest that, by doubling the number of producers with access to land through rental, from about 15 million currently, liberalization of rental markets could have far-reaching impacts.     

Risk coping and starvation in rural China

We use a 3-year panel from two poor provinces in Southern China to examine the nature of risks to which rural households are exposed and their ability to insure calorie consumption and spending of total consumption against idiosyncratic shocks to their income. We find that idiosyncratic risks are indeed the main source of income variation in the sample, consumption is better insured than total spending. Unlike total spending where full insurance is rejected in most cases, calorie intake is completely insured for both land-rich and land-poor households in both provinces. Access to even modest amounts of land significantly enhances households’ ability to guard against total spending. Land-rich households are much better insured against total spending than land-poor households. The results are robust across model specifications although Generalized Method of Moments (GMM) estimations increase the magnitude of difference in total spending between the land-rich and the land-poor. Policies targeting poverty reduction and improving land use rights and land access to the poor could potentially improve the overall risk sharing ability of the rural poor.     

Can diaries help in improving agricultural production statistics? Evidence from Uganda

Although good and timely information on agricultural production is critical for policy-decisions, the quality of underlying data is often low and improving data quality could have high payoff. We use data from a production diary, administered concurrently with a standard household survey in Uganda to analyze the nature and incidence of responses, the magnitude of differences in reported outcomes, and factors that systematically affect these. Despite limited central supervision, diaries elicited a strong response, complemented standard surveys in a number of respects and were less affected by problems of respondent fatigue than expected. The diary-based estimates of output value consistently exceed that from the recall-based production survey, in line with reported disposition. Implications for policy and practical administration of surveys are drawn out.     

Sri Lanka’s Rural Non-Farm Economy: Removing Constraints to Pro-Poor Growth

We use a survey of rural enterprises from Sri Lanka to explore characteristics of the informal non-farm sector and identify obstacles to its expansion and productivity. Value added in this sector amounts to 80% of agricultural GDP participating households’ incomes are significantly higher than those of households who do not participate. Barriers to entry are low and the impact of non-farm development on inequality modest, implying a large potential contribution to growth and poverty reduction. Infrastructure constraints negatively affect new startups, investment in, and productivity of existing enterprises, with small enterprises being particularly affected.