Within-group heterogeneity and group dynamics: analyzing exit of microcredit groups in Angola

The effect of within-group heterogeneity on the survival of social groups is theoretically ambiguous. A greater diversity of ideas, experience, and networks can have a positive effect on members’ benefits from group membership, but diversity also creates a potential for conflict. This paper analyzes the relation between heterogeneity and exit of microcredit groups, using data from Angola. The results suggest that the form of group heterogeneity matters. Fragmentation in terms of social identities, or more specifically religious-linguistic fractionalization, is associated with a greater probability of group exit. Within-group economic inequality, however, is associated with a decrease in the probability of exit, but at a diminishing rate.     

Finance Constraints and Firm Transition in the Informal Sector: Evidence from Indian Manufacturing

This paper focuses on the role of finance constraints in determining the lack of transition of firms in India from very small family firms, which are the predominant type of firms in the informal sector, into larger informal firms that employ non-family labour. Using a rich firm-level data-set drawn from nationally representative surveys of the Indian informal manufacturing sector, this paper tests for the role played by finance constraints in firm transition in the informal sector at the firm and district level. There is evidence that the difficulty that firms face in accessing external finance acts as a significant constraint to small firm growth in the informal sector. Looking at data from India's districts, it is found that the financial development in a given district increases the likelihood that firms in the district will make the transition from household enterprises into non-household enterprises.     

Impact of cooperatives on smallholders' commercialization behavior: evidence from Ethiopia

This article examines the impact of marketing cooperatives on smallholder commercialization of cereals using detailed household data in rural Ethiopia. We use the strong government role in promoting the establishment of cooperatives to justify the use of propensity score matching to compare households that are cooperative members to similar households in comparable areas without cooperatives. The analysis reveals that although cooperatives obtain higher prices for their members, they are not associated with a significant increase in the overall share of cereal production sold commercially by their members. However, these average results hide considerable heterogeneity across households. In particular, we find that smaller farmers tend to reduce their marketed output as a result of higher prices, whereas the opposite is true for larger farmers.     

Agricultural production and children's diets: evidence from rural Ethiopia

We study the relationship between pre‐school children's food consumption and household agricultural production. Using a large household survey from rural Ethiopia, we find that increasing household production diversity leads to considerable improvements in children's dietary diversity. However, we also document how this nonseparability of consumption and production does not hold for households that have access to food markets. These findings imply that nutrition‐sensitive agricultural interventions that push for market integration are likely to be more effective in reducing under‐nutrition than those promoting production diversity.     

Agricultural extension and imperfect supervision in contract farming: evidence from Madagascar

This article tests whether agricultural extension and imperfect supervision—conflated here into the number of visits by a technical assistant—increase productivity in a sample of contract farming arrangements between a processing firm and small agricultural producers in Madagascar. Production functions are estimated which treat the number of visits by a technical assistant as an input and which exploit the variation in the number of visits between the contracted crops grown on a given plot by a specific grower, thereby accounting for district‐, grower‐, and plot‐level unobserved heterogeneity. Results indicate that the elasticity of yield with respect to the number of visits lies between 1.3 and 1.7.     

The Internationalization of Firms From India: Investment,Mergers and Acquisitions

This paper analyses the rapid expansion in outflows of foreign direct investment from India and the spurt in foreign acquisitions by Indian firms, during the past decade, situated in the wider context of international investment from developing countries. Much of the investment was in manufacturing activities and most of the acquisitions were in industrialized countries. The economic stimulus and the strategic motive for the internationalization of firms from India were provided by a range of underlying factors driving the process, which differed across sectors and firms. The rapid growth in investment and acquisitions by Indian firms were partly attributable to factors implicit in the liberalization of the policy regime and the greater access to financial markets; but it must be recognized that Indian firms could not have become international without the capacity and the ability to compete in the world market. The attributes of Indian firms, which created such capacities and abilities, are embedded in the past and have emerged over a much longer period of time.     

Effects of microcredit and other loans on female empowerment in Bangladesh: the borrower's gender influences intra‐household resource allocation

This article examines microcredit's effectiveness in empowering women borrowers in rural Bangladesh. It does so by examining how gender‐specific borrowing activities influence household expenditures which are either specifically of interest to men or women, and by examining the effects of all loans rather than only those provided by microcredit organizations. The article uses a quasi‐experimental design to identify the effects of borrowing by men and women by using an original combination of panel data and instrumental variables on subsamples of the surveyed population. It finds that the borrower's gender affects how households allocate their resources to different expenditure items and assets that are valued differently by men and women. In all, the findings suggest that providing greater credit access to women may improve their household bargaining positions.     

Tenants’ land access in the rental market: evidence from northern Ethiopia

The purpose of this study is to investigate the allocation efficiency in the tenancy market, and thereby the potential of the market to facilitate operational farm size adjustment that can help land‐poor tenant households to transform into smallholder commercial farms. We analyzed three rounds of balanced panel data for the production seasons 2005–2006, 2009–2010, and 2014–2015 collected from 320 smallholder farms in Tigrai region in northern Ethiopia. Random effects dynamic probit and tobit models are used to assess how land‐poor tenants’ access and extent of access to land are affected by state dependency (earlier participation in the market), kinship ties, climate shocks, and legal restrictions. The results indicate that state dependency and kinship ties with the landholder had strong positive effects on participation and intensity of participation. Climate shocks significantly affected the intensity of participation of tenants already in the rental market. Tenants’ overall access to rented land had not improved from 2005–2006 to 2014–2015. The amount of land accessed by those already in the market was insufficient for them to become commercial farmers. The important policy implication is that orchestrated interventions at community level are needed to reduce transaction costs and thereby improve land access of entrepreneurial tenants.     

Capital market imperfections in economic transition: empirical evidence from Ukrainian agriculture

This article investigates the link between financing and investment in Ukrainian agriculture during economic transition. The main contribution of the study is to provide empirical evidence for the coexistence of financial constraints and soft budget constraints (SBCs). This is of particular importance because credit constraints and SBCs have completely different economic effects. The lack of differentiation between these forms of capital market imperfections yields overlapping effects of financing on investment and may therefore cause a misinterpretation of econometric results. Our empirical analyses are based on an econometric estimation of the Euler investment equations for 529 large farms from three Ukrainian regions between 2001 and 2005. The results confirm that financial variables significantly influence farms' investment, providing empirical evidence of an imperfect capital market in Ukrainian agriculture. It turns out that credit constraints in the Ukrainian agricultural sector are more important than SBCs. We show that the estimated level of financial constraints for profitable farms with access to loans is higher if both types of capital market imperfections are appropriately distinguished.     

Intellectual property piracy in a North–South context: empirical evidence

The protection of intellectual property rights (IPR) has been a contentious issue for more than 20 years. Industrialized nations have moved to knowledge‐based economies, and simultaneously, trade barriers have fallen, making intellectual property (IP) vulnerable. Adding to this vulnerability are conflicting international institutional environments, belief systems, and economic realities. The debate over IPR protection has become a significant global trade issue pitting the net‐technology producing “North” against the net‐technology consuming “South.” With this in mind, there has been much debate about the impact of alternative IPR regimes (tight or loose) on the welfare of Southern economies. Policy makers, in both the South and the North, search for arguments to convince recalcitrant Southern countries to follow the Northern model of strict IPR regimes. The South, faced with a dilemma, searches for arguments to justify looser regimes or convince its populace that tighter regimes are in the best interest of the nation. The objective of this research is to add empirical clarity about the welfare impacts of weak IPR on the firm and host country. To this end, we employ a novel methodological design and unique context. The research design is deductive, in that we use the empirical setting of Pioneer‐Argentina, S.A., a seller of bioengineered agricultural seeds, to test the existing theory of weak IPR impacts in a North–South context.     

The role of intellectual property rights in seed technology transfer through trade: evidence from U.S. field crop seed exports

A panel of 134 countries over the period 1985–2010 is used to evaluate the effect of intellectual property rights (IPRs) on field crop seed imports from the United States. Based on estimating a gravity equation using the Heckman selection and Poisson fixed‐effects panel econometric methods, the results indicate that membership of countries in both the International Union for the Protection of New Varieties of Plants and the Trade‐Related Aspects of Intellectual Property Rights Agreement of the World Trade Organization have a positive and statistically significant effect on their imports of U.S. field crop seeds. These results, however, are also sensitive to both income level of importing countries and better enforcement of IPRs by those countries.     

Moving up the processing ladder in primary product exports: Sri Lanka's "value-added" tea industry

Governments in many developing countries, influenced by the experience of the East Asian newly industrialized countries, have adopted policies to enhance domestic processing of primary commodities as a tool for accelerating employment growth, export revenues, and development. Sri Lanka has traditionally exported tea in the form of bulk (commodity) teas, but “value‐added” teas such as packaged teas, tea bags, etc., have expanded in recent years. This article examines factors affecting the processing of value‐added tea products in Sri Lanka by modeling export supply behavior. Estimates of the long‐run relationship and short‐run dynamics of export supply are presented and discussed. The price of value‐added tea relative to bulk tea, and industry capacity, are identified as the main determinants of export supply, while exchange rate changes have no discernible effect. The policy implications of the analysis for enhancing further expansion of such value‐added teas are presented. These are of interest for both policy makers and development analysts. In particular, the reasons that undermine the effectiveness of exchange rate policy as an instrument to stimulate value addition of primary products have much relevance for similar developing countries.     

Vertical coordination and farm performance: evidence from the catfish sector in Vietnam

Using an original dataset from the Vietnamese catfish sector, I analyze the impact of vertical coordination options, namely, contract farming and vertical integration, on farm performance, which is measured in terms of yields and revenue per hectare. The effects of vertical coordination are estimated using a maximum simulated likelihood estimator and a two‐stage least square regression with instrumental variables to account for endogenous farm and household characteristics and selection on unobservable characteristics. The results show that vertically integrated farms have substantially higher yields and revenue per hectare than nonintegrated farms. The levels of gains that can be attributed to integration are large and consistent under different estimation procedures, and there is no difference between nonintegrated and contract farms in terms of farm performance.     

The capability approach as a framework for assessing the role of microcredit in resource conversion: the case of rural households in the Madagascar highlands

This article applies the capability approach in order to analyse microcredit as a tool for resource conversion, which permits poor households to take advantage of latent opportunities. This approach calls for linking microcredit with the choices of the poor themselves. A sample of 290 rural households from the Madagascar highlands was surveyed over two consecutive years. To identify the most relevant dimensions of poverty available for a conversion process, data were processed using factor analysis. A hierarchical classification then permitted the distribution of the households over three capability levels. Finally, an ordered multinomial logit brings out how microcredit influences the likelihood that a household receiving such a loan will reach a higher capability level. The main findings indicate that microcredit represents a robust means to obtain a higher level of capability. Moreover, when the process of borrowing endures, poor households enter into a learning process that increases the effect of microcredit. Regardless of the gender of the household head, microcredit increases the probability of reaching an enhanced level of capability, except for the poorest households headed by a woman. The head of household’s level of education only improves the effect of microcredit if the productive system implemented needs specific competencies related to educational attainment.     

Firm adoption of international standards: evidence from the Ethiopian floriculture sector

Global trade in agriculture and food products is increasingly governed by an array of standards. In order to continue exporting, developing countries have little choice but to comply with the new requirements. This study uses a census based panel data set from the nascent floriculture industry in Ethiopia to empirically examine the determinants of firms’ adoption of international private standards in fresh horticulture produce in large‐scale estate farms. The econometric analysis shows that larger size, older, and foreign owned firms are more likely to adopt the private standards. Moreover, this study analyzes the overall industry level efforts and public–private partnership to launch and implement a national scheme GAP and build a firm's capacity to comply with the standards.     

How financial investment distorts food prices: evidence from U.S. grain markets

Convergence between commodity futures prices and the underlying physical assets at each contract's expiration date is a pivotal condition for the market's functioning. Between 2005 and 2010, convergence failed for several U.S. grain markets. This article presents a price pressure‐augmented commodity storage model that links the scale of nonconvergence to financial investment channeled through indices, which are traded in commodity futures markets. The model is empirically tested, using Markov regime‐switching regression analysis. Regression results strongly support the model's predicted link between index investment and the extent of nonconvergence for three grains traded at the Chicago Board of Trade: wheat, corn, and soybeans.     

Sharecropping efficiency in Ethiopia: threats of eviction and kinship

We tested a theoretical model with the Marshallian inefficiency (H1) and threat of eviction (H2) hypotheses having opposite effects on land productivity on sharecropped plots. The model also assumes that kinship contracts may eliminate or reduce the Marshallian inefficiency (H3) and threat of eviction (H4) effects on land productivity. Our empirical findings were consistent with H2 and H4 being true. We found higher land productivity on sharecropped plots than on share tenants' own plots and higher land productivity on sharecropped plots of nonkin than of kin tenants. The nature of the data allowed controlling for unobservable household characteristics through household fixed effects and for observable plot characteristics. Analyses with and without plot characteristics revealed that these findings were stronger with plot characteristics than without them. Based on the plausible assumption that observable plot characteristics are positively correlated with unobservable plot characteristics this strengthens our conclusion. The results are also supported by first-order stochastic dominance analysis. Sharecropped plots' output value distribution unambiguously dominated the output value distribution from share tenants' own plots. Nonkin sharecropped plots' output value distribution also first-order stochastically dominated the output value distribution from kin sharecrop plots.     

Political reservation and female empowerment: evidence from Maharashtra,India

This paper studies the impact of political reservation for women on political participation and empowerment of women living in areas where gender quotas are mandated. Following the 1992 passage of the 73rd Constitutional Amendment in India, one-third of village government head positions are reserved for women. Utilizing the random allocation of reserved seats and a unique individual level data-set which captures a large set of measures on political participation of women, we find that women residing in areas with a female village government head show significantly higher levels of political participation and empowerment. Overall, the observed effect can be entirely attributed to improved outcomes of women from a lower socio-economic strata, while no effect is found for economically better-off women. The results suggest that the imposed gender quotas are an effective means of overcoming inequalities and contributed to giving disadvantaged women more voice and opportunity for political empowerment. We further investigate the role that the level of women’s political participation plays on the type and quality of public services delivered. Our results indicate that the level of women’s political participation and empowerment is an important channel through which public service delivery is influenced.     

Markets and pro-poor agricultural growth: insights from livelihood and informal rural economy models in Malawi

This article presents the development of a set of programming models describing the major features of different rural livelihoods and of the informal rural economy they together make up in Malawi. The models allow for differentiated responses by different household types to change and for the partial equilibrium effects of consequent supply, demand, and price adjustments in labor and grain markets. The models provide insights into the relations between own‐farm and nonown‐farm activities in different households' livelihoods and in the informal rural economy as a whole, and are used to investigate possible impacts of increasing cash crop prices and of a more open rural economy. Impacts of these changes on the poor are found to be critically dependent upon supply and demand elasticities in labor and grain markets, but the poor could potentially suffer significant losses from increased openness of the local economy leading to increased expenditure by less poor households on imported goods and services.