Cattle sharing and rental contracts in an Agrarian economy: evidence from Ethiopia

Empirical evidence on the role of cattle sharing and rental contracts in agrarian economies is limited. This article is an investigation of different types of cattle sharing and rental contracts producers in rural Ethiopia adopt. It also investigates why households in rural Ethiopia rely on these contracts that are vulnerable and therefore subject to potential moral hazard problems described in earlier literature. We apply random effect probit and control function econometric methods to household panel data collected in 2005 and 2007 from two agro‐ecological zones in Ethiopia. Controlling for the endogeneity of access to livestock credit, we find that contracts are spatially fragmented and better developed where population density is high and credit and insurance markets are poorly developed. We also find that contracts help cash poor and credit constrained households to improve their herd dynamics, to get access to nonlivestock resources (land, labor and cash) and share risks that could have been difficult without the contract. We show that contracts are rational responses of residents in rural communities characterized by imperfect credit and insurance services, since households with better access to credit are less likely to rely on contracts.     

Cost Structure and Vertical Integration between Farming and Processing

In several food‐producing sectors, we observe vertical integration between the farming and processing stages. The salmon industry, which has motivated this paper, has seen a rise in large vertically integrated companies over the last decade, with direct ownership of production activities including hatcheries, fish processing and exporting. Both the farming and processing stages have become more capital intensive, which has led to a steeper U‐shaped average cost (AC) curve. In this paper we present a theoretical link between this technological shift and vertical integration: in a repeated game model of relational contracting, we show that when the AC curve is sufficiently steep, then processors and farmers are more likely to vertically integrate. The reason is that steep AC curves make it costly to deviate from the optimal production scale, which in turn makes processors more vulnerable to hold‐up and opportunistic behaviours from its suppliers.     

The interaction between macroprudential and monetary policies: The cases of Norway and Sweden

To shed light on the interaction between macroprudential and monetary policies, we study the inward transmission of foreign monetary policy in conjunction with domestic macroprudential and monetary policies in Norway and Sweden. Using detailed bank‐level data, we show how Norwegian and Swedish banks’ lending reacts to monetary policy surprises arising abroad, controlling for the domestic macroprudential stance and the interaction between monetary and macroprudential policies. In both countries, domestic macroprudential policy helps mitigate the effects arising from foreign monetary surprises.     

A Theory of Civil Conflict and Democracy in Rentier States*

The effects of resource rents on the political equilibrium have been studied in two main types of models. The first tradition uses models of conflict, and studies how resource rents affect the intensity and duration of civil conflict. The second tradition uses political economy models, where resource rents affect the political equilibrium due to changes in the costs and benefits of buying votes. Although they provide considerable insight, these traditions have little to say about when democracy emerges, and about when conflict emerges. In this paper, by integrating the earlier model traditions, we suggest the simplest possible framework we can think of to study the choice between conflict and democracy. We show how factors such as resource rents, the extent of electoral competition, and productivity affect economic and political equilibria.     

Einige Punkte einer Preistheorie mit Boden und Arbeit als Produktionsfaktoren

Ohne ZusammenfassungDer vorliegende Artikel wurde durch das Studium von Oskar Engländers Theorie der Volkswirtschaft, Erster Teil, Preisbildung und Preisaufbau. Wien: Julius Springer, 1929, angeregt. Meiner Meinung nach ist Prof. Engländers Behandlung einiger Punkte im Preisbildungsprozeß, wenn Boden und Arbeit als Produktionsfaktoren angesehen werden, ebenso wie seine Analyse an anderen Stellen des Buches irrig. Ich bereite für die Zeitschr. f. Nationalökonomie eine kritische Studie in dieser Verbindung vor. Um dieser Kritik einen guten Rückhalt zu geben, will ich zuerst meine eigene Auffassung davon darlegen, was eine konstruktive Theorie auf diesem Gebiet enthalten muß. Dies geschieht im vorliegenden Artikel. Die Kritik wird in einem folgenden Artikel gegeben werden.Das vorliegende Exposé gibt nicht vor, eine vollständige oder endgültige Untersuchung des Problems an die Hand zu geben. In der Tat werden nur einige von den allerersten und sehr elementaren Begriffen einer solchen Untersuchung erörtert. Aber während die vorliegende Entwicklung weit davon entfernt ist, eine vollständige Lösung des Problems zu geben, hat sie doch, wie ich glaube, das bescheidene Verdienst, daß sie solche Punkte berührt, wo der wirkliche Kern des Problems liegt.Übersetzt von Gerhard Tintner, Wien.     

The credibility approach to experience rating

Summary

Chapter 1 presents the problem of experience rating and the objective of credibility theory. In Chapter 2 the so-called “limited fluctuation credibility theory” is presented briefly. The far more important and developed “greatest accuracy credibility theory” is introduced in Chapter 3. The discussion in Chapters 1–3 is carried through with a minimum of mathematics, the aim being to explain the basic ideas and techniques. A fuller account of the greatest accuracy theory is given in Chapter 4. The division of the matter into paragraphs reflects the distinction between what can be called the classical or empirical Bayes point of view and the (purely) Bayesian point of view. In Chapter 5 are mentioned some selected problems related to practical applications of the theory.     

Conflicting uses of marine resources: can ITQs promote an efficient solution?*

This paper examines the allocation problem arising from conflicting demands for marine resource use by (i) commercial fishers, (ii) recreational fishers, and (iii) conservationists. It is shown that decentralised trading of individual transferable quotas (ITQs) is capable of an efficient allocation of resource use between the first two parties. In contrast, it is found that the standard ITQ system is not capable of performing the same ideal co‐ordination between the conflicting interests of extractive users, that is, all fishers, and the non‐extractive ones, that is, conservationists. The reason is that quota trades between individual fishers and conservationists are inevitably accompanied by (positive) externalities on both other fishers and conservationists. As a result, decentralised quota trades between these parties cannot be efficient. The fundamental economic observation is that quotas for conservation and for extraction constitute two different goods. It follows that a socially optimal market allocation of these two goods requires two prices instead of the single quota price in the standard ITQ system. Thus, to achieve efficiency, the ITQ system has to be extended to incorporate both types of goods. It is shown in the paper that if fishers and conservationists can organise themselves into groups, trades of conservation quotas between the two groups can in principle lead to fully efficient allocation. An interesting implication of this modified ITQ system is that the need for a fisheries authority to set the total allowable catch (TACs) disappears.     

Impacts of Norwegian Milk Quotas on Output Growth: A Modified Distance Function Approach

Quota regulations that prevent output expansion of farms and reallocation of output between farms can cause lower growth in output and productivity. The aim of this study was to explain the output growth rate of Norwegian dairy farms since 1976, and to decompose it into output, input, socioeconomic and technical change components. Instead of using the standard distance function approach for multi‐output technologies, we use a growth rate formulation, which automatically removes the farm‐specific effects. This formulation also helps to impose non‐negativity constraints on marginal products of inputs (input elasticities), which are often violated for many observations, especially when flexible functional forms are used. The farm‐level panel data cover three periods: before the quota scheme was introduced (1976–1982); the period with the most output‐restricting quota scheme (1983–1996); and the period with a more flexible quota scheme (from 1997 onwards). Results show that the milk quota regulations had a significant constraining effect on output growth, in particular on milk output in the period 1983–1996. Furthermore, the output mix has shifted towards meat production for the average farm. What emerges from this study is that output growth and technical change are negatively influenced by policy aims where productive performance has not been the primary objective, and that there is scope for increased farm growth if the quota regime is liberalised.