Avishay Braverman

Sharecropping and the interlinking of agrarian markets

One of the often noted features of less-developed agrarian economies is the existence of interlinkages among the land, labor, credit, and product markets. The landlord is often the supplier of credit; he frequently purchases and markets the output of the tenant farmers, and often sells raw materials and even consumption goods to his tenant farmers. How can this phenomenon be explained? What are the welfare consequences of attempts to restrict these practices, which often seem to constitute restraints on free trade? These are the questions to which this paper is addressed. A general set of arguments applicable to both competitive and noncompetitive environments are presented, to situations where all the terms of the contract are determined in an optimal way as well as to situations where many of the terms are specified institutionally. Section I examines interlinked credit and tenancy contracts; Section II examines interlinked marketing and tenancy contracts; Section III points out the possible interlinking between labor contracts and consumption goods markets; and Section IV presents the different equilibrium frameworks discussed in the paper, such as monopoly, monopsony, competition, and equilibria with surplus labor.

Rural credit markets and institutions in developing countries : lessons for policy analysis from practice and modern theory

This article presents evidence of the failure of government intervention in rural credit markets of LDCs in the past three decades. It then shows how lessons for policy analysis can be drawn from modern theory, particularly those theories focussing on credit rationing in competitive markets and interlinking of credit contracts with labor and land contracts. The article outlines the policy implications of these theories and finds them insufficient to account for the empirical evidence. It contends that a more systematic and rigorous analysis of institutions and institutional environments is essential for understanding and implementing effective policy reforms of rural credit markets. It presents suggestions for undertaking such an analysis.

Credit and sharecropping in agrarian societies

This paper considers a model of linkage between land, labor and credit transactions in the context of sharecropping. The papers objectives are: a) to derive and characterize the equilibrium in a model of a land-scarce, labour-abundant economy under sharecropping, given an infinitely elastic supply of identical sharecroppers at a reservation utility; and b) to demonstrate that in an imperfect market, a landlord may offer credit to his tenant, sometimes even at a subsidized rate of interest, without necessarily insisting that the sharecropper borrow only from him, precluding an involuntary linkage between credit and land transations. It has been demonstrated that regardless of the presence or absence of linkage or any other control by the landlord, as long as he can vary the size of the plot given to a tenant and there are enough potential tenants, in equilibrium contracts a tenants utility under sharecropping will be the same as that which he could have obtained as a full-time wage laborer. This result implies that policies other than land reform will not affect the welfare of tenants.

Capital requirements, screening and interlinked sharecropping and credit contracts

This paper provides one more rationale for interlinking credit and tenancy contracts in the context of production loans. In an environment characterized by a heterogeneous labor pool and imperfect information, landlords will have an incentive to avail themselves of screening devices. By linking tenancy and credit contracts a screening device can be implemented. The equilibrium set of contracts is characterized by a variety of interest rates, some of which might be below the market interest rate; the interest rate-principal schedule is downward sloping, with higher ability tenants choosing larger principals at lower interest rates.

Urban bias and the political economy of agricultural reform

Abstract This paper is an exercise in the incorporation of “political economy” constraints into the analysis of policy reform. It is an illustrative exercise, focusing on the potential distributional consequences of agricultural price reform. In the stylized model discussed in the paper, “urban bias” is reflected in the ability of the urban sector to maintain its standard of living in the face of price reform, through the channel of increased government expenditure on the output of the sector. It is shown that in such a setting price reform may have completely unintended effects. The paper appears in a somewhat unusual format. The first half of the paper presents the arguments in an entirely non-technical, verbal, manner. The second half of the paper presents a formal, mathematical development which makes precise the heuristic and intuitive discussions of the first half.

Wheat and Maize Price Policies in Hungary: Tradeoffs between Foreign Exchange and Government Revenue

This paper reports on a methodology designed to examine the effects of selected agricultural policies in Hungary. The purpose of the paper is twofold. The first is to explain the methodology, dubbed multi-market analysis in previous work, which is implemented on personal computers to support discussions on policy reforms. The second is to examine wheat and maize policies in Hungary. While the model is constructed to focus on these policies, it will also be possible to outline ways to use the model to address other problems.