Firm and Market Response to Saving Constraints: Evidence from the Kenyan Dairy Industry
Lorenzo Casaburi and
Rocco Macchiavello ()
No 10952, CEPR Discussion Papers from C.E.P.R. Discussion Papers
This paper documents how saving constraints can spill over into other markets. When producers value saving devices, trustworthy buyers can offer them infrequent payments - a commitment tool - and purchase at a lower price. This affects the nature of competition in the output market. We present a model of this interlinked saving-output market for the case of the Kenyan dairy industry. Multiple data sources, experiments, and a calibration exercise support its microfoundations and predictions concerning: i) producers' demand for infrequent payments; ii) an asymmetry across buyers in the ability to credibly commit to 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 discuss additional evidence from other contexts, including labor markets, and derive policy implications concerning contract enforcement, financial access, and market structure.
Keywords: Agricultural Markets; Competition; Imperfect Contract Enforcement; Interlinked Transactions; Saving Constraints; Trust (search for similar items in EconPapers)
JEL-codes: L22 O12 O16 Q13 (search for similar items in EconPapers)
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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 (2017)
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