Risk as impediment to privatization? The role of collective fields in extended agricultural households

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Résumé

As in the case of cooperatives, collective fields in extended agricultural households act as an insurance device, but entail inefficiencies arising from the incentives to free ride on co-workers efforts. Privatization provides good incentives but decreases the level of risk-sharing. The classical analysis of this tradeoff rules out another major risk-sharing mechanism, namely income transfers. This paper is a first attempt to merge the two insurance mechanisms: collective production, which is plagued by free riding and income transfers, which are hampered by limited commitment. Privatization of land is shown to interact with incentives to abide by the insurance agreement, so that the tradeoff between risk-sharing and production may or may not be maintained with income transfers. We show that an increase in the value of the household members' exit option or a decrease in patience decreases the optimal rate of privatization, while larger households are more likely to privatize land.
langue originaleAnglais
Nombre de pages50
journalEconomic Development and Cultural Change
étatPublié - 2018

Empreinte digitale

privatization
insurance
incentive
income
co-worker
commitment
household
Impediments
Incentives
Privatization
Income transfers
Agricultural households
Risk sharing
Insurance
Values
land
Household
Trade-offs

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title = "Risk as impediment to privatization?: The role of collective fields in extended agricultural households",
abstract = "As in the case of cooperatives, collective fields in extended agricultural households act as an insurance device, but entail inefficiencies arising from the incentives to free ride on co-workers efforts. Privatization provides good incentives but decreases the level of risk-sharing. The classical analysis of this tradeoff rules out another major risk-sharing mechanism, namely income transfers. This paper is a first attempt to merge the two insurance mechanisms: collective production, which is plagued by free riding and income transfers, which are hampered by limited commitment. Privatization of land is shown to interact with incentives to abide by the insurance agreement, so that the tradeoff between risk-sharing and production may or may not be maintained with income transfers. We show that an increase in the value of the household members' exit option or a decrease in patience decreases the optimal rate of privatization, while larger households are more likely to privatize land.",
author = "Jean-Philippe Platteau and Catherine Guirkinger and Matthieu Delpierre",
year = "2018",
language = "English",
journal = "Economic Development and Cultural Change",
issn = "0013-0079",
publisher = "University of Chicago",

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T2 - The role of collective fields in extended agricultural households

AU - Platteau, Jean-Philippe

AU - Guirkinger, Catherine

AU - Delpierre, Matthieu

PY - 2018

Y1 - 2018

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AB - As in the case of cooperatives, collective fields in extended agricultural households act as an insurance device, but entail inefficiencies arising from the incentives to free ride on co-workers efforts. Privatization provides good incentives but decreases the level of risk-sharing. The classical analysis of this tradeoff rules out another major risk-sharing mechanism, namely income transfers. This paper is a first attempt to merge the two insurance mechanisms: collective production, which is plagued by free riding and income transfers, which are hampered by limited commitment. Privatization of land is shown to interact with incentives to abide by the insurance agreement, so that the tradeoff between risk-sharing and production may or may not be maintained with income transfers. We show that an increase in the value of the household members' exit option or a decrease in patience decreases the optimal rate of privatization, while larger households are more likely to privatize land.

M3 - Article

JO - Economic Development and Cultural Change

JF - Economic Development and Cultural Change

SN - 0013-0079

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