Social Networks and Factor Markets: Panel Data Evidence from Ethiopia

Kibrom Abay, Goytom Kahsay and Guush Berhane

No 210869, 2015 Conference, August 9-14, 2015, Milan, Italy from International Association of Agricultural Economists

Abstract: In the absence of well-established factor markets, the role of indigenous institutions and social networks can be substantial for mobilizing factors for agricultural production. We investigate the role of an indigenous social network in Ethiopia, the iddir, in facilitating factor market transactions among smallholder farmers. Using detailed longitudinal household survey data and employing a difference-in-differences approach, we find that iddir membership improves households’ access to factor markets. Specifically, we find that joining an iddir network improves households’ access to land, labor and credit transactions between 7 and 11 percentage points. Furthermore, our findings also indicate that iddir networks crowd-out borrowing from local moneylenders (locally referred as Arata Abedari), a relatively expensive credit source, virtually without affecting borrowing from formal credit sources. These results point out the roles non-market arrangements, such as social networks, can play in mitigating market inefficiencies in poor rural markets.

Keywords: Marketing; Public Economics (search for similar items in EconPapers)
Pages: 48
Date: 2015
New Economics Papers: this item is included in nep-agr, nep-soc and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Social Networks and Factor Markets: Panel Data Evidence from Ethiopia (2014)
Working Paper: Social networks and factor markets: Panel data evidence from Ethiopia (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:iaae15:210869

DOI: 10.22004/ag.econ.210869

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