Risk as Impediment to Privatization? The Role of Collective Fields in Extended Agricultural Households

Jean-Philippe Platteau, Catherine Guirkinger and Matthieu Delpierre

No 12344, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: As in the case of cooperatives, collective fields in extended agricultural households act as an insurance device, but entail inefficiencies arising from the incentives to free ride on co-workers efforts. Privatization provides good incentives but decreases the level of risk-sharing. The classical analysis of this tradeoff rules out another major risk-sharing mechanism, namely income transfers. This paper is a first attempt to merge the two insurance mechanisms: collective production, which is plagued by free riding and income transfers, which are hampered by limited commitment. Privatization of land is shown to interact with incentives to abide by the insurance agreement, so that the tradeoff between risk-sharing and production may or may not be maintained with income transfers. We show that an increase in the value of the household members' exit option or a decrease in patience decreases the optimal rate of privatization, while larger households are more likely to privatize land.

Keywords: Land tenure; Mixed farms; Privatization; Risk-sharing (search for similar items in EconPapers)
Date: 2017-10
New Economics Papers: this item is included in nep-agr and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Risk as Impediment to Privatization? The Role of Collective Fields in Extended Agricultural Households (2012)
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