Contract Duration and the Division of Labor in Agricultural Land Leases

Short-term contracts provide weak incentives for durable input investment if post-contract asset transfer is difficult. Our model shows that when both agents provide inputs, optimal contract length balances weak incentives of one agent against the other. This perspective broadens the existing contract duration literature, which emphasizes the tradeoff between risk sharing and contract costs. We develop hypotheses and test them based on private grazing contracts from the Southern Great Plains. We find broad support for the implications of our model. For example, landowners provide durable land-specific inputs more often under annual versus multiyear contracts.land lease contracts, moral hazard, contract duration, division of labor

How land title affects child labor ?

Secure property rights are considered a key determinant of economic development. However, evaluation of the causal effects of land titling is a difficult task. Since 2004, the Brazilian government, through a program called"Papel Passado,"has issued titles to more than 85,000 families and has the goal to reach 750,000. Another topic in public policy that is crucial for developing economies is child labor force participation. In Brazil, about 5.4 million children and teenagers between 5 and 17 years old are working full time. This paper examines the direct impact of securing a property title on child labor force participation. In order to isolate the causal role of ownership security, this study uses a comparison between two close and similar communities in the City of Osasco case (a town with 650,000 people in the São Paulo metropolitan area). The key point of this case is that some units participate in the program and others do not. One of them, Jardim Canaã, received land titles in 2007; the other, Jardim DR, given fiscal constraints, will not be part of the program until 2012, and for that reason became the control group. Estimates, generated using the difference-in-difference econometric technique suggest that titling results in a substantial decrease in child labor force participation for the families that received the title compared with the others. These findings are relevant for future policy tools for dealing with informality and how it affects economic growth.Labor Policies,Access to Finance,,Debt Markets,Gender and Law

An Interdisciplinary Perspective on the Relationship between Ethics and Today’s Capitalism

The paper begins by emphasizing the fact that, on a historical scale, one can have several views of the relationship that has existed over time between ethics and capitalism, namely: missionary, ‘Nietzschean’, critical, and ‘regulatory’. It is argued that, nowadays, the capitalization of the contributions supplied, over time, by the four views embraces the form of two modern diametrically opposed perspectives, i.e.: on the one hand, there is the interpretation given by the neo-classical school of thought (mainstream economics) and, on the other hand, it comes to the interpretation given by the Austrian praxeological economic school (libertarian economics). The emphasis of the analysis is put on the assertions developed by the last one, libertarian thinking, that insists on the necessity to operate with a well-defined distinction between the legal level of the matter, the ethical level and the moral one. At the core of the libertarian analysis there is the understanding of the capitalist system being naturally impregnated by ethical values. And this intrinsic ethical nature of capitalism is organically bound to the sphere of the ownership-type relationship. In line with the understanding of the economic system, based on the institutions of the free market as representing ethical capitalism per se, the paper argues that the realities of the world today show governmental interventionism as a main factor that supports non-ethical economic behaviour. As a consequence, the more limited government intervention is, the greater the chance of ethical capitalism, that is, voluntary, non-conflictual and non-aggressive economic market relationships. Under such conditions, a ‘minimal state’ institutional arrangement (that is, the legitimate use of power by the state is limited to preventing fraud or the use of force; it does not include the power to tax or to confiscate property) is the basic condition for the existence of an ethical capitalism that works, which is to say that the chance of an economic system based on ethical values stands in people’s willingness to be part of such an evolution in society that aims to minimise the role of the state. Further, the paper argues that any historical analysis on how societies asserted such a willingness outlines the expression of a secular and unshaken option for growing rather than diminishing state involvement in the economy. It is about people’s perennial preference for the state, namely for the organization of society based on state interventionism (respectively, their preference for the coercive order imposed by the state authorities, order based, through its own nature, on the subjugation of private property and the aggression against individual freedom), with a preference for the government intervention over the organization of a society based on free market functioning (which is equivalent, in fact, to their rejection of a voluntarily and spontaneously non-violent order, based on the observance of private property and individual freedom, brought about by the free functioning of markets). In the last part of the paper there are put forward for discussion the possible explanations for this perennial preference for non-ethical capitalism, the analysis focusing on two directions: firstly, on that of social ontology; and then, on that of human psychology

Institutions and efficiency in transition economies

This paper analyzes the effects of political and economic institutions on efficiency of transition economies over the 1995-2005 period. Perpetual Inventory Method is used to construct capital series for these countries, and then stochastic production frontier analysis is used to estimate the efficiency scores and effects of institutions at the same time. The empirical results show that better institutions are associated with higher efficiency. However, all else equal, the transition countries in East Asia are more efficient than Central and Eastern European or Former Soviet Union transition countries

Why the Rich May Favor Poor Protection of Property Rights

In unequal societies, the rich may benefit from shaping economic institutions in their favor. This paper analyzes the dynamics of institutional subversion by focusing on the public protection of property rights. If this institution functions imperfectly, agents have incentives to invest in private protection of property rights. The ability to maintain private protection systems makes the rich natural opponents of public property rights and precludes grass-roots demand to drive the development of the market-friendly institution. The economy becomes stuck in a bad equilibrium with low growth rates, high inequality of income, and wide-spread rent-seeking. The Russian oligarchs of 1990s, who controlled large stakes of newly privatized property, provide motivation for this paper.property rights, demand for institutions, oligarchs, Russia

How populist democracy promotes market liberalization

Using a new set of micro evidence from an original survey of 28 transition countries, we show that democracy increases citizens' support for the market by guaranteeing income redistribution to inequality-averse agents. Our identification strategy relies on the restriction of the sample to inhabitants of open borders between formerly integrated countries, where people face the same level of market development and economic inequality, as well as the same historically inherited politico-economic culture. Democratic rights increase popular support for the market. This is true, in particular, of inequality-averse agents, provided that they trust political institutions. Our findings suggest that one solution to the recent electoral backlash of reformist parties in the former socialist block lies in a deepening of democracy.democracy ; income inequality ; redistribution ; market liberalization ; trust

Market reform and state paternalism in Hungary: a path-dependent approach

Hungary is one of the worst-hit countries of the current financial crisis in Central and Eastern Europe. The deteriorating economic performance of the country is, however, not a recent phenomenon. A relatively high ratio of redistribution, a high and persistent public deficit and accelerated indebtedness characterised the country not just in the last couple of years but also well before the transformation, which also continued in the postsocialist years. The gradualist success of the country – which dates back to at least 1968 – in the field of liberalisation, marketisation and privatisation was accompanied by a constant overspending in the general government. The paper attempts to explore the reasons behind policymakers’ impotence to reform public finances. By providing a path-dependent explanation, it argues that both communist and postcommunist governments used the general budget as a buffer to compensate losers of economic reforms, especially microeconomic restructuring. The ever-widening circle of net benefiters of welfare provisions paid from the general budget, however, has made it simply unrealistic to implement sizeable fiscal adjustment, putting the country onto a deteriorating path of economic development

South American Expert Roundtable : increasing adaptive governance capacity for coping with unintended side effects of digital transformation

This paper presents the main messages of a South American expert roundtable (ERT) on the unintended side effects (unseens) of digital transformation. The input of the ERT comprised 39 propositions from 20 experts representing 11 different perspectives. The two-day ERT discussed the main drivers and challenges as well as vulnerabilities or unseens and provided suggestions for: (i) the mechanisms underlying major unseens; (ii) understanding possible ways in which rebound effects of digital transformation may become the subject of overarching research in three main categories of impact: development factors, society, and individuals; and (iii) a set of potential action domains for transdisciplinary follow-up processes, including a case study in Brazil. A content analysis of the propositions and related mechanisms provided insights in the genesis of unseens by identifying 15 interrelated causal mechanisms related to critical issues/concerns. Additionally, a cluster analysis (CLA) was applied to structure the challenges and critical developments in South America. The discussion elaborated the genesis, dynamics, and impacts of (groups of) unseens such as the digital divide (that affects most countries that are not included in the development of digital business, management, production, etc. tools) or the challenge of restructuring small- and medium-sized enterprises (whose service is digitally substituted by digital devices). We identify specific issues and effects (for most South American countries) such as lack of governmental structure, challenging geographical structures (e.g., inclusion in high-performance transmission power), or the digital readiness of (wide parts) of society. One scientific contribution of the paper is related to the presented methodology that provides insights into the phenomena, the causal chains underlying “wanted/positive” and “unwanted/negative” effects, and the processes and mechanisms of societal changes caused by digitalization

Transition or Development? Reassessing Priorities for Law Reform

The modern literature on international development in conjunction with the rise of institutional economics has focused attention on the role of institutions in the operation of the economy and crucially on the function of law as setting a framework to market operations. An emerging consensus that views development as a legal in as much as an economic challenge is forcing us to revaluate the relationship between law, regulation, state power and the market. Indeed, the greater the need for law, the larger the role of the state in the economy. The purpose of this article is to enquire into the implications the modern literature on economic development emanating from international institutions (primarily the World Bank and the International Monetary Fund) has for law reform and the role of the state in the economy. The main question asked is whether regulation has a uniform role in all reform contexts or whether there is a difference between the role of law in the transition to a market economy as opposed to the promotion of general development. This article suggests that there is indeed a difference between the role of law in transition as opposed to development that centres on the primacy of the state in the design for reform. While transition, it is suggested, requires a more limited role for law (Washington Consensus), development necessitates a more thorough involvement of the state in the reform process (Post-Washington Consensus). This article offers some preliminary evidence to suggest that a minimal role for regulation focused on market promotion required by ‘transition type’ reforms is adopted across the board and applied indiscriminately to all development scenarios. This means that reform packages remain rather minimal in the involvement of the state and in the scope for law despite the input of institutional economics and the apparent enthusiasm for the promotion of the rule of law. The article concludes that once a distinction is drawn between the different designs needed for transition and development, it becomes evident that a larger role for law and state regulation is needed that goes beyond mere market promotion. The promotion of development which encompasses political, social and economic aspects therefore asks for a wider role for the state

Privatization and State Capacity in Postcommunist Society

Economists have used cross-national regression analysis to argue that postcommunist economic failure is the result of inadequate adherence liberal economic policies. Sociologists have relied on case study data to show that postcommunist economic failure is the outcome of too close adherence to liberal policy recommendations, which has led to an erosion of state effectiveness, and thus produced poor economic performance. The present paper advances a version of this statist theory based on a quantitative analysis of mass privatization programs in the postcommunist world. We argue that rapid large-scale privatization creates severe supply and demand shocks for enterprises, thereby inducing firm failure. The resulting erosion of tax revenues leads to a fiscal crisis for the state, and severely weakens its capacity and bureaucratic character. This, in turn, reacts back on the enterprise sector, as the state can no longer support the institutions necessary for the effective functioning of a modern economy, thus resulting in deindustrialization. Using cross-national regression techniques we find that the implementation of mass privatization programs negatively impacts measures of economic growth, state capacity and the security of property rights.http://deepblue.lib.umich.edu/bitstream/2027.42/40192/3/wp806.pd