Decentralization and local public goods: getting the incentives right

The paper addresses the nature and locus of appropriate government control in the provision of collective services. It suggests some useful principles for determining organizational structures with the appropriate degree and form of decentralization, which is seen to be an important part of incentive compatibility. In the case of low-income housing it cites the privatization of sites and services and devolution of upgrading as two promising models of decentralization.decentralization, incentive compatible, devolution

INVESTING in Agriculturally-Led Growth: The Philippine Case

Much of the debate on the role of agriculture in economic development centers on whether agriculture should be taxed or subsidized. The classical prescription for economic development is investment in industrial modernization financed by an agricultural surplus. Proponents of agricultural development have cautioned, however, that squeezing the agricultural sector will stifle the engine of growth and lead to economic stagnation (e.g., Johnston and Mellor, 1961; Krishna, 1967). Instead, they have advocated the opposite policy of stimulating agricultural development through investment and subsidies to the agricultural sector. The 1980s witnessed a widespread recognition that either taxing or subsidizing agriculture wastes resources and reduces the incentives for investment (see e.g. World Developme~R~et port, 1983 and 1987). This leads to the conundrum that motivates the present paper: how can agricultural development be stimulated without distorting the incentives for efficient resource allocation and investment

The Political Economy of Corruption: A Philippine Illustrationa

This essay explores the nature, causes, and consequences of corruption as it pertains to entire regimes. Grand corruption is modeled as a type of unproductive rent-seeking at the highest levels of government. The economic costs of corruption are assumed to increase in the decentralization (and relaxation) of its governance, increase convexly in the percentage extracted, and decreasing in the opportunities for productive rent-seeking. Combining these assumptions with the benefits of corruption yields the results that optimal corruption revenues are increasing in greed of the regime and in economic opportunities but that the economic costs of corruption may be highest in the least avaricious regime. The theory is illustrated with a stylized account of corruption in three Philippine administrations, from 1973-1998. Policy implications are discussed, including the role of the economist in making corruption less attractive.Corruption, Philippines, kleptocracy

Population and Agricultural Development

Thinking about population as a driver of agricultural development provides insights into induced technical and institutional change, whether it be Esther Boserup's declining fallow period, modern crop varieties, or the specialization pyramid that arises in labor-intensive agriculture. The non-convexities of research and development, infrastructure investments, and specialization imply that modest population pressure does not necessarily exert downward pressure on wages. As agricultural growth stimulates industrialization, the non-convexities of specialization become ever more compact. The combination of these and the increased demand for human capital, if not inhibited by policy failures, tends to promote a virtuous circle of human progress.population, agricultural development, Boserup, non-convexities, specialization, institutional change

The Economics of Agricultural Development: What Have We Learned? Processes

Agricultural development thinking has gone through several stages of fad and fancy, often without an understanding of previous fallacies. Its current doldrums are unfortunate given the unrivaled importance of agricultural development for poverty reduction in most development countries. After reviewing several policy and program areas, lessons are synthesized, and a forwardlooking research framework suggested, especially regarding role of specialization in the evolution of economic organization. The corresponding role of government is seen to be the facilitation of economic cooperation, rather than social engineering.

The Economics of Agricultural Development: What Have We Learned?

The history of thought in the field of Economic Development and corresponding development programs have gone through a series of identifiable phases. Phases of theory and praxis in Agricultural Development are likewise compared. In both cases, there is an apparent lost opportunity to learn the lessons of past failures and successes before moving to the next fad. After reviewing several policy and program areas, a few lessons are synthesized, a forward-looking research framework suggested, and the appropriate role of foreign aid discussed. A particular theme of interest is the balance in thinking and programs between social engineering and facilitation of economic cooperation.International Development,

HOW to Facilitate or Stifle Economic Development: The Role of Agriculture in Indonesia and the Philippines

Strikingly different patterns of agricultural growth and widely divergent results in terlnsof rural income. poverty. and employment have cmcrged in Southeast Asia. In the Philippiies, with someregional variations, a patterns of declining red farm wages,increasing landlessness in worsening poverty and diminishing employmctlt relative to demand for jobs has emerged despite some brief periods of improvcment since 1960. Sincc 1980, the employment and poverty situation has deteriorated sharply,particularly in areas concentrating on single traditional export crops (lkc sugar or coconuts) but also in amore general context. Indonesia (particularly in Java, which contains over 60 pcrcent of the population) succeeded in reversing a seemingly inevitable worsening of poverty and inequality in the rural economy with strong evidence indicating that rural real wages and income of small farmers rose substantially between the mid-1970sand late 1980s. Why such divergent patterns of rural development exist and the lessons that can be extracted from thc varied cxperiences of 1ndoncsia and the Philippines are subjects of this papcr.agriculture, economic develoment, Indonesia, the Philippines

Risk aversion as effort incentive: A correction and prima facie test of the moral hazard theory of share tenancy

We show that Stiglitz's (1974) principal-agency theory of share tenancy does not imply, as alleged, that the optimal tenant share is less than one for risk-averse tenants nor that the share decreases monotonically with tenant risk aversion. Tenants may self insure by working harder increasingly so for higher levels of risk aversion with the result that the more risk averse work for higher shares. When the model is parameterized based on previous studies of Philippine agriculture, it predicts a U-shaped relationship between optimal tenant''s share and risk aversion. Landlords choose rent contracts for both high and low levels of risk aversion and shares from 80-99% for intermediate levels. In contrast, actual shares in the study area ranged from 50-60%, with most farmers contracted on a 50:50 basis. We conclude that rent contracts must have additional disadvantages and/or share tenancy additional benefits that are not accounted for in the static principal-agency theory.agricultural contracts