Hans P. Binswanger

Attitudes toward risk: experimental measurement in rural India.

Attitudes toward risk were measures in 240 households using two methods: an interview method eliciting certainty equivalents and an experimental gambling approach with real payoffs which, at their maximum, exceeded monthly incomes of unskilled laborers. The interview method is subject to interviewer bias and its results were totally inconsistent with the experimental measures of risk aversion. Experimental measures indicate that, at high payoff levels, virtually all individuals are moderately risk-averse with little variation according to personal characteristics. Wealth tends to reduce risk aversion slightly, but its effect is not statistically significant.

Behavioural and material determinants of production relations in agriculture

In this essay we develop a framework for analysing the major institutions governing the production and exchange of output and the primary factors of production in rural areas. The analysis incorporates general considerations of risk and information constraints jointly with the principal material attributes of agriculture and of agricultural production factors. The framework is used to analyse barriers to the existence of the major intertemporal and factor markets. It is applied specifically to land‐scarce environments for which it provides an internally consistent explanation for many of the well‐documented institutional features of such settings. In addition, the analysis provides new implications for, among other phenomena, the inter‐relationships among ownership holdings, operational scale, family size and factor productivity; for the scarcity of animal rental markets and use of animals as collateral; for the renting out of land by small landowners; and for the existence of plantations for certain crops.

A Cost Function Approach to the Measurement of Elasticities of Factor Demand and Elasticities of Substitution

production function for estimating production parameters has several advantages: 1. It is not necessary to impose homogeneity of degree one on the production process to arrive at estimation equations. Cost functions are homogeneous in prices regardless of the homogeneity properties of the production function, because a doubling of all prices will double the costs but will not affect factor ratios.

Behavioral and Material Determinants of Production Relations in Land-Abundant Tropical Agriculture

The objectives of this paper are (1) to explain, in an internally consistent manner, the major institutions and customary features of production relations in three agroclimatic subzones of the land-abundant tropics that have simple technology and high transport costs and (2) to provide predictions of how these institutions and features will change in response to increases in population densities and the opening of substance-oriented systems via external migration and interregional or international trade. Production relations are the relations of people to products and factors of production in terms of their rights of ownership and use and the corresponding relationships of people among each other as buyers and sellers, as factor owners and renters, as landlords, tenants, workers, employers, creditors, and debtors. The peculiar institutional and customary features of land-abundant areas that we want to explain in an internally consistent manner include the absence of regular output and labor markets; the nonexistence of a landless labor class; the minimal nature of credit markets and the absence of professional money lenders; the importance of livestock wealth as an insurance substitute in semiarid zones; the existence of livestock tenancy but the absence of tenancy in land; the existence and the insurance function performed by extended families; and the cultivation by extended families of plots in common in some regions but not in others. We also want to be able to predict the changes in these institutions and features that arise when population density grows and/ or when the economy is exposed to external markets.

MARKETS IN TRADABLE WATER RIGHTS: POTENTIAL FOR EFFICIENCY GAINS IN DEVELOPING COUNTRY WATER RESOURCE ALLOCATION

Abstract Establishment of tradable water rights could play an important role in improving the efficiency, equity, and sustainability of water use in developing countries. Well-defined tradable rights formalize and secure the existing water rights held by water users; economize on transactions costs; induce water users to consider the full opportunity cost of water; and provide incentives for water users to internalize and reduce many of the negative externalities inherent in irrigation. The institutional requirements, potential and feasibility of developing markets in tradable water rights should receive increased attention from researchers and policy makers.

Brazilian policies that encourage deforestation in the Amazon

This paper shows that general tax policies, special tax incentives, the rules of land allocation, and the agricultural credit system all accelerate deforestation in the Amazon. These policies increase the size of land holdings and reduce the chances of the poor to become farmers. The following are the key provisions: (i) the virtual exemption of agricultural income from income taxation makes agriculture a tax shelter; (ii) rules of public land allocation provide incentives for deforestation because the rules used in determining the security of a claim and its land area encourage land clearing; (iii) the progressive land tax contains provisions that encourage the conversion of forest to crop land or pasture; (iv) the tax credit scheme aimed toward corporate livestock ranches subsidizes inefficient ranches established on cleared forest land; and (v) subsidized credit is available for SUDAM-approved ranches.

Risk aversion and credit constraints in farmers' decision‐making: A reinterpretation

In 1976 the Agricultural Development Council sponsored a conference on ‘Risk, Uncertainty and Agricultural Development’ which has been summarised in a volume edited by James Roumasset, Jean‐Marc Boussard and Inderjit Singh [1979]. The volume provides an excellent review of the state of the art at that time. However, as discussed in the summary chapters of that volume, there were few theoretical, empirical, or policy issues on which clear conclusions could be reached on the basis of knowledge then available. In the intervening years progress has been made on a number of issues as a result of both empirical investigations and theoretical advances. This paper concentrates on advances which have relevance to the controversy about the relative roles of risk aversion and credit constraints in limiting farmers’ investment levels, especially for purchased inputs such as seeds or fertilizers. In particular, we review recent experimental studies on the extent of risk aversion among farmer populations in developing ...

A Microeconomic Approach to Induced Innovation

Invention possibilities are reformulated using research processes which have a cost and different implications for rates and biases of technical change. In the comparative static model a firm has the choice to build a plant of existing design or to improve it by research. The firm maximizes present value over the lifetime of the plant. Research costs and present value of capital and labor costs influence research mix and rate and bias to technical change. Controversies in the literature of induced innovation are discussed in terms of the model. A rise in labor costs does not necessarily lead to a more labor saving bias.

South African land policy: The legacy of history and current options

Abstract The highly dualistic farm structure of South Africa and the low productivity of native African farmers have been the result of systematic distortions in land allocation, output markets, the provision of infrastructure, agricultural credit, and services. The dualistic structure did not emerge because of genuine economies of scale in the large commercial sector. Other countries in Latin America and Africa that once supported a dualistic farm size structure through similar distortions have either implemented large-scale land reforms or have experienced decades of peasant revolts and civil war. The paper compares these international experiences to South Africa, and outlines judicial and market-assisted approaches to South African land reform.

Natural resource degradation effects of poverty and population growth are largely policy-induced: the case of Colombia

The sustainability of natural resource use is influenced by population pressure, but this exercises a much less critical impact than the overall policy framework. In Colombia, various agricultural and other policies whose effect is to constrain the poors access to land encourage environmental degradation. A case is made in favour of the new land reform process that Colombia is launching.