Marcel Fafchamps

Drought and Saving in West Africa: Are Livestock a Buffer Stock?

Households in the west African semi-arid tropics face substantial risk -- an inevitable consequence of engaging in rainfed agriculture in a drought-prone environment. It has long been hypothesized that these households keep livestock as a buffer stock to insulate their consumption from income fluctuations income. This paper tests this hypothesis. Results indicate that livestock transactions play less of a consumption smoothing role than often assumed. Livestock sales compensate for at most thirty percent, and probably closer to twenty percent of income shortfalls due to village-level shocks alone. We discuss possible explanations for these results and suggest directions for future work.

Returns to Social Network Capital Among Traders

Using data on agricultural traders in Madagascar, this paper shows that social network capital has a large effect on firm productivity. Better connected traders have significantly larger sales and value added than less connected traders after controlling for physical and human inputs as well as for entrepreneur characteristics. The analysis indicates that three dimensions of social network capital should be distinguished: relationships with other traders, which among other things help firms economize on transactions costs; relationships with potential lenders; and family relationships, which reduce efficiency, possibly because of the blurring of firm boundaries. We find no evidence that social capital favors collusion.

Rural Poverty, Risk and Development

This book investigates the relationships between rural poverty, risk, and development. Building upon the author’s work in the area, it summarises the contributions of recent theoretical and empirical work to our understanding of how risk affects rural poverty levels in developing countries. In particular the book examines what we do and do not know about risk coping strategies among today’s poor rural societies. Ways in which these strategies may be re-examined and improved by governments and international organisations are proposed.

The enforcement of commercial contracts in Ghana

This paper documents how commercial contracts are enforced in Ghana. It is based on a World Bank case study of enterprise finance and contract enforcement conducted in January 1993. The study is part of an ongoing effort undertaken by the Regional Program for Enterprise Development (RPED), Africa region, to understand the environment in which manufacturing firms operate in Sub-Saharan Africa and to propose ways of promoting their development (The World Bank (1992)). Strengthening institutions that enforce commercial contracts is one of several avenues to improve the business environment in Africa. This paper is organized as follows. Key concepts are introduced in the first section. The relationship between the need for contractual flexibility, trust, and reputation is emphasized. Survey results from Ghana are presented in section two. Lessons from the survey are discussed in section three. Legal and institutional changes are suggested that should increase the willingness of Ghanaian firms to grant trade credit, even to firms or individuals with whom they have not done business before. Thinking about commercial contracts in terms of enforcement not only helps understand many African business practices. It also constitutes an entry point into policy making by establishing a much needed link between the practice of law and the economic theory of institutions.

Relationships and traders in Madagascar

This article documents the role that personal relationships play in economic exchange. Original survey data show that agricultural traders in Madagascar perceive relationships as the most important factor for success in their business. Evidence details the extent to which relationships are used to serve a variety of purposes such as: the circulation of information about prices and market conditions; the provision of trade credit; the prevention and handling of contractual difficulties; the regularity of trade flows; and the mitigation of risk. Of these, the regularity of supply and demand and the sharing of risk appear particularly important. Larger and more prosperous traders are those with quantitatively and qualitatively better relationships. Family plays little role in business beyond assistance at start‐up.

Ethnicity and Credit in African Manufacturing

Abstract This paper investigates whether market interaction can, by itself, perpetuate the lack of ethnic diversity that is observed in the business communities of many developing countries. Using case study data on manufacturing firms in Kenya and Zimbabwe, we find no evidence that blacks or women are disadvantaged in the attribution of bank credit once we control for firm size and other observable characteristics. In contrast, an ethnic and gender bias is noticeable in the attribution of supplier credit. Although we cannot rule out the presence of discrimination, the bulk of the evidence indicates that network effects play an important role in explaining this bias.

Do African Manufacturing Firms Learn from Exporting

We use firm-level panel data for the manufacturing sector in four African countries to investigate whether exporting impacts on efficiency, and whether efficient firms self-select into the export market. Based on simultaneous estimation of a production function and an export regression, our preferred results indicate significant efficiency gains from exporting, which can be interpreted as learning by exporting. We show that modelling unobserved heterogeneity by a flexible approach is important for deriving this conclusion. A policy implication of our results is that Africa would gain from orientating its manufacturing sector towards exporting.

Land Tenure and Allocative Efficiency in Niger

Using field-level data, we investigate whether traditional land tenure systems are an impediment to allocative efficiency in Niger. We find that yields are strongly influenced by the manpower available to farming households, an indication that marginal returns to labor and land are not equalized across households. We uncover no relationship between manuring and whether or not local customs allow land sales. But manuring is influenced by tenure security: farmers who cultivate both borrowed and owned fields divert manure toward the latter. Our findings do not imply that a change in land tenure system is called for. Copyright 1996, Oxford University Press.

Human Capital, Productivity, and Labor Allocation in Rural Pakistan

This paper investigates whether human capital affects the productivity and labor allocation of rural households in four districts of Pakistan. The investigation shows that households with better-educated males earn higher off-farm income and divert labor resources away from farm activities toward nonfarm work. Education has no significant effect on productivity in crop and livestock production. The effect of human capital on household incomes is partly realized through the reallocation of labor from low-productivity activities to nonfarm work. Female education and nutrition do not affect productivity and labor allocation in any systematic fashion, a finding that is consistent with the marginal role women play in market-oriented activities in Pakistan. As a by-product, our estimation approach also tests the existence of perfect labor and factor markets; the hypothesis that such markets exist is strongly rejected.

Selling at the Farmgate or Traveling to Market

Using detailed survey data from Uganda, this article examines whether coffee producers sell to itinerant traders or directly to markets, where they can get a higher price but must incur a transport cost. We find that selling to the market is more likely when the quantity sold is large and the market is close by. Wealthy farmers are less likely to sell to the market, possibly because the shadow value of their time is higher. But if they have a large quantity of coffee for sale, they are more likely to sell it to the market. They are also more likely to travel to a distant market. These findings are consistent with their better ability to pay for public transportation. We find no evidence that the decision to sell at the farmgate is driven by a self-control motive.