Maitreesh Ghatak

Competition and Incentives with Motivated Agents

A unifying theme in the literature on organizations such as public bureaucracies and private nonprofits is the importance of mission, as opposed to profit, as an organizational goal. Such mission-oriented organizations are frequently staffed by motivated agents who subscribe to the mission. This paper studies incentives in such contexts and emphasizes the role of matching the mission preferences of principals and agents in increasing organizational efficiency. Matching economizes on the need for high-powered incentives. It can also, however, entrench bureaucratic conservatism and resistance to innovations. The framework developed in this paper is applied to school competition, incentives in the public sector and in private nonprofits, and the interdependence of incentives and productivity between the private for-profit sector and the mission-oriented sector through occupational choice.

The Economics of Lending with Joint Liability: Theory and Practice

The specification discloses a racking arm having a telescoping boom with a supported end and a free cantilevered end. A pipe gripping head is secured to the cantilevered end of the boom for clamping about elongated members such as pipe sections, drill collars, riser pipes or the like. The supported end of the boom is mounted for pivotal movement about a vertical axis and a motor is provided to selectively rotate the boom about the vertical axis. Hydraulic cylinders are provided to selectively raise and lower the free cantilevered end of the boom. Hydraulic cylinders also are provided to extend and retract the boom to selectively vary the length thereof. In operation, the boom is disposed on a drilling rig with the supported end spaced above the working platform of the drilling rig and the vertical axis spaced away from the well bore axis. The boom may then be employed to move elongated pipe members for various storage positions to the well bore or other areas and vice-versa. The pipe gripper head is normally automatically maintained horizontal during vertical movement of the boom. A first embodiment of the pipe gripper head clamps pipe sections, drill collars and the like for lateral movement while allowing the pipe sections and drill collars to slide vertically along their axes. In a second embodiment of the gripper head, riser pipe having an irregular cross-section may be tightly gripped by the gripper head.

Group lending, local information and peer selection

This paper analyzes how group lending programs use joint liability to utilize local information that borrowers have about each others projects through self-selection of group members in the group formation stage. These schemes are shown to lead to positive assortative matching in group formation. Faced with the same contract, this makes the effective cost of borrowing lower to safer borrowers: because they have safer partners, conditional on success their expected dues to the lender are lower than that of riskier borrowers. The resulting improvement in the pool of borrowers is shown to increase repayment rates and welfare. q 1999 Elsevier Science B.V. All rights reserved.

Empowerment and Efficiency: Tenancy Reform in West Bengal

The paper analyzes the effect of agricultural tenancy laws offering security of tenure to tenants and regulating the share of output that is paid as rent on farm productivity. Theoretically, the net impact of tenancy reform is shown to be a combination of two effects: a bargaining power effect and a security of tenure effect. Analysis of evidence on how contracts and productivity changed after a tenancy reform program was implemented in the Indian state of West Bengal in the late 1970s suggests that tenancy reform had a positive effect on agricultural productivity there.

Screening by the Company You Keep: Joint Liability Lending and the Peer Selection Effect

We look at an economic environment where borrowers have some information about the nature of each others projects that lenders do not. We show that joint-liability lending contracts, similar to those used by credit cooperatives and group-lending schemes, will induce endogenous peer selection in the formation of groups in a way that the instrument of joint liability can be used as a screening device to exploit this local information. This can improve welfare and repayment rates if standard screening instruments such as collateral are unavailable.

Government Versus Private Ownership of Public Goods

There has been a dramatic change in the division of responsibility between the state and the private sector for the delivery of public goods and services in recent years with an increasing trend towards contracting out to the private sector and ‘public-private partnerships’. This Paper analyses how ownership matters in public good provision. We show that if contracts are incomplete then the ownership of a public good should lie with a party that values the benefits generated by it relatively more. This is true regardless of whether this party is also the key investor, or other aspects of the technology.

Property Rights and Economic Development

This chapter develops a unified analytical framework, drawing on and extending the existing literature on the subject, for studying the role of property rights in economic development. It addresses two fundamental and related questions concerning the relationship between property rights and economic activity. (i) What are the mechanisms through which property rights affect economic activity? (ii) What are the determinants of property rights? In answering these, it surveys some of the main empirical and theoretical ideas from the extensive literature on the topic.

A simple model of inequality, occupational choice, and development

We analyze a simple and tractable model of occupational choice in the presence of credit market imperfections. We examine the effect of parameters governing technology and transaction costs, and history, in terms of the initial wealth distribution, in determining the long-term wealth distribution and the level of per capita income of an economy.

Can unobserved heterogeneity in farmer ability explain the inverse relationship between farm size and productivity

Abstract The well-known inverse relationship between farm size and productivity is usually explained in terms of diminishing returns with respect to land and other inputs coupled with various types of market frictions that prevent the efficient allocation of land across farms. We show that even in the absence of diminishing returns one can provide an alternative explanation for this phenomenon using endogenous occupational choice and heterogeneity with respect to farming skills.

Joint Liability Lending and the Peer Selection Effect

We show that the joint liability lending contracts derived in Ghatak (2000) violate an ex post incentive-compatibility constraint which says that the amount of joint liability cannot exceed the amount of individual liability. We derive and characterise optimal separating joint liability contracts incorporating this constraint.