Tackling Opportunism in LSLIs

Luis Tomás Montilla Fernández
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Luis Tomás Montilla Fernández: University of Hamburg

Chapter Chapter 5 in Large-Scale Land Investments in Least Developed Countries, 2017, pp 261-338 from Springer

Abstract: Abstract In Chap. 4, we showed that NIE could highlight the sources of opportunism and offered two approaches to tackle it. These approaches were modelled with PAT and CT. We know that control mechanisms are needed to decrease agency costs and to create incentives for parties to draft more complete contracts. We learnt about the institutional structures and the environment in which LSLIs take place, as well as the specific institutional areas in which incentives should be allocated to decrease agency costs. We showed the causal relationship between principal-agent problems and incomplete contracts in LSLIs. We argued that one way to justify why incomplete contracts are signed is pre-existing principal-agent problems. Contracts are incomplete and fail to incentivise parties to behave as required to achieve pre-determined goals and to fulfil IL obligations. Furthermore, we showed why and how violations of HRs to property and to food occur. In Chap. 3 we analysed the mechanisms in IL to protect the rights of affected individuals and investors. We elucidated which obstacles exist in IL from asymmetric levels of protection and how they lead to opportunistic behaviour. For this reason, incentives are allocated asymmetrically and lead to non-compliance and a higher cost for the enforcement of HRL. The opposite is the case in IIL, where correctly allocated incentives effectively protect the rights of investors.

Date: 2017
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DOI: 10.1007/978-3-319-65280-1_5

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