Désiré Vencatachellum

Asymmetric Information and Adverse Selection in Mauritian Slave Auctions

Information asymmetry is a necessary prerequisite for testing adverse selection. This paper applies this sequence of tests to Mauritian slave auctions. The theory of dynamic auctions with private and common values suggests that when an informed participant is known to be active, uninformed bidders will be more aggressive and the selling price will be higher. We conjecture that observable family links between buyer and seller entailed superior information and find a strong price premium when a related buyer purchased a slave, indicative of information asymmetry. We then test for adverse selection using sale motivation. Our results indicate large discounts on voluntary as compared to involuntary sales. Consistent with adverse selection, the market anticipated that predominantly low-productivity slaves would be brought to the market in voluntary sales. Copyright 2009, Wiley-Blackwell.

Endogenous growth with strategic interactions

Abstract In an endogenous growth framework, firms allocate their stock of human capital between research and development (R&D) and manufacturing activities to maximize their discounted lifetime profits. We derive conditions under which there exist more than one balanced growth path when a small number of firms invest strategically in R&D. Endogenous growth models which abstract from strategic interactions in such an environment will either underestimate or overestimate the growth rate. Policies aimed at increasing the growth rate may in fact lead to a slowdown if firms believe that it is worthwhile to wait so as to benefit from future higher levels of knowledge. Moreover, countries starting at the same level of knowledge can experience different growth rates because of firms strategic R&D investment.

Optimal Pass-Through of Oil Prices in an Economy with Nominal Rigidities

In many developing and emerging market economies, governments intervene to limit the degree to which oil-price increases are passed through to domestic fuel prices. This paper investigates whether, and to what extent, this intervention is warranted in an oil-importing economy characterized by nominal rigidities in the goods and labor markets. Our results indicate that, to the extent that monetary policy is capable of stabilizing the economy, government intervention in the oil market must be avoided. On the other hand, when complete stabilization is not attainable as a result of sub-optimal monetary policy, the government can improve social welfare by limiting the degree of pass-through of oil prices. We find, however, that the welfare gain from pursuing such a policy is negligible.

Slave prices from succession and bankruptcy sales in Mauritius, 1825–1827

We construct a unique data set from succession and bankruptcy sales in Mauritius to investigate the determinants of slave prices between 1825 and 1827. We find that males, females sold with children, skilled slaves and slaves sold during the peak sugar cane harvest season all fetched higher prices. In comparison, handicapped and non-native slaves were sold at a discount. Moreover, the young-children premium increased over the period. This may indicate that slave owners did not think that slavery would be abolished in the near future or thought that they would be compensated in such an event.

Horizontal R&D Cooperation and Spillovers: Evidence from France

We use the French portion of the 2002 Community Innovation Survey to test how spillovers a®ect the likelihood that ¯rms cooperate in R&D. Unlike most existing empirical studies, our results clearly support well-established theoretical predictions of the industrial organization literature. We find that a firm which benefits from higher spillovers from her rivals is more likely to cooperate horizontally in R&D. Moreover, the impact of incoming spillovers on the likelihood of horizontal R&D cooperation is positive and statistically significant only when they are above a threshold. Both the value, and the precision of the estimates, increase with the information flow which firms report receiving from their competitors.

Foreign Direct Investments in Africa's Farmlands: Threat or Opportunity for Local Populations?

We study the welfare effects of government-backed FDIs in Africa’s farmlands. We build an occupational choice model featuring four mechanisms driving these effects. First, local farming is subject to social arrangements prescribing that farmers share their crop surplus with kin. Second, proceeds from land investment deals are invested to make modern inputs affordable to local farmers. Third, these deals cause some farmers to shift to wage employment. Fourth, they also entrench export-oriented agriculture, at the expense of local markets. We show that three conditions are sufficient for such deals to make local people better off: (i) the state has a high capacity and willingness to negotiate deals that benefit local people; (ii) these deals create enough jobs; (iii) wage employment make displaced farmers better off. Fulfilling these three conditions, however, may conflict with the interests of profit-maximizing foreign investors.

Balancing development returns and credit risks: project appraisal in a multilateral development bank

Debates amongst civil society organizations on the governance of multilateral development banks expressed concerns regarding institutional capacities to ensure quality-at-entry in private sector projects where developmental and social impacts must balance financial viability. This paper delves upon the African Development Banks experience in this regard by exploring its ex-ante impact assessment and project appraisal tools. Overall, the introduction of an independent development-oriented project appraisal framework has increased the development focus of portfolio decisions along the lines drawn by institutional mandates. Empirical results suggest that development and risk concerns taken into account during project appraisal are independent from each other, and that no assumption should be made about one with respect to another. Findings also suggest that considerations regarding financial additionality matter when it comes to adding value in projects, as do concerns over benefits to households.

The Political Economy of Social Inclusion

We build a political economy model of state policy choice highlighting the challenges to breaking barriers to the adoption of inclusive policies in Africa. We highlight necessary and sufficient conditions for a political leader to gain from implementing exclusive policies: (i) Implementing inclusive policies must be risky; (ii) the political leader must have adequate access to an overseas’ financial safe haven as a technology for protecting the spoils from implementing exclusive policies, or investing the looted funds in the domestic economy must sufficiently contribute to mitigate the risk of a revolution. Our results suggest that breaking barriers to inclusive policies in Africa is not an easy task. Bans on international money-laundering schemes may not be sufficient if domestic money laundering is easy and sufficiently discrete.

Adverse Selection in the Market for Slaves in Mauritius, 1825-1835

Evidence on adverse selection in slave markets remains inconclusive. We study this question through notarial acts on public slave auctions in Mauritius between 1825 and 1835, involving 4,286 slaves. In addition to slave characteristics, the acts document the identities of buyers and sellers. We use this information to determine whether the buyer of a slave was related (e.g. a relative or a spouse) to the original slave owner, and thus most likely better-informed than other bidders. Auction-theoretic models predict that bidding should be more agressive when informed bidders are present in open-bids, ascending auctions, such as slave auctions. By proxying informed bidders by related bidders, our results consistently indicate that this is the case, pointing toward presence of residual adverse selection in the market for slaves in Mauritius.