Firm and Market Response to Saving Constraints: Evidence from the Kenyan Dairy Industry

Lorenzo Casaburi and Rocco Macchiavello
Additional contact information
Lorenzo Casaburi: Stanford University

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: Failures in saving markets can spill over into other markets: When producers are saving constrained, trustworthy buyers can offer infrequent delayed payments—a saving tool—and purchase at a lower price, thus departing from standard trade credit logic. This paper develops a model of this interlinkage and tests it in the context of the Kenyan dairy industry. Multiple data sources, experiments, and a calibration exercise support the microfoundations and predictions of the model concerning: i) producers’ demand for infrequent payments; ii) heterogeneity across buyers in the ability to supply low frequency payments; iii) a segmented market equilibrium where buyers compete by providing either liquidity or saving services to producers; iv) low supply response to price increases. We provide additional evidence from other settings, including labor markets, and discuss policy implications concerning contract enforcement, financial access, and market structure.

Keywords: Saving Constraints; Imperfect Contract Enforcement; Interlinked Transactions; Competition; Trust; Agricultural Markets. JEL Classification: O12, L22, O16, Q13. (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-agr
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www2.warwick.ac.uk/fac/soc/economics/resea ... 017_macchiavello.pdf

Related works:
Working Paper: Firm and Market Response to Saving Constraints: Evidence from the Kenyan Dairy Industry (2018)
Working Paper: Firm and Market Response to Saving Constraints: Evidence from the Kenyan Dairy Industry (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cge:wacage:322

Access Statistics for this paper

More papers in CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE) Contact information at EDIRC.
Bibliographic data for series maintained by Jane Snape ().