Property Rights in a Flea Market Economy

Marcel Fafchamps () and Bart Minten ()

Working Papers Series from Centre for the Study of African Economies, University of Oxford

Abstract: This paper studies liberalised grain markets in Madagascar and examines how property rights are protected and contracts are enforced among agricultural traders. We find that the incidence of This paper studies liberalised grain markets in Madagascar and examines how property rights are protected and contracts are enforced among agricultural traders. We find that the incidence of theft and breach of contract is low, and that the losses resulting from such instances are small. This, however, does not result from reliance on legal institutions - actual recourse to police and courts are fairly rare, except in cases of theft - but from traders' reluctance to expose themselves to malfeasance. As a result, Malagasy grain trade has high transactions costs, and little or no forward contracting. The dominant contract enforcement mechanism is trust-based relationships. Trust is established primarily through repeated interaction with little role for referral by other traders. Information on bad clients does not circulate widely, hence severely limiting group punishments for non-payment.

Keywords: PROPERTY RIGHTS; AGRICULTURE; CONTRACTS (search for similar items in EconPapers)
JEL-codes: K11 Q10 Q15 O55 (search for similar items in EconPapers)
Date: 1999
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Working Paper: Property rights in a flea market economy (1999)
Journal Article: Property Rights in a Flea Market Economy (2001)
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