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

50 Pages Posted: 9 Oct 2017

See all articles by Matthieu Delpierre

Matthieu Delpierre

Regional Government of Wallonia, Belgium - Institut wallon de l'Evaluation, de la Prospective et de la Statistique (IWEPS)

Catherine Guirkinger

University of Namur - Department of Economics

Jean‐Philippe Platteau

University of Namur

Date Written: October 2017

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: Privatization; Risk-Sharing; Land Tenure; Mixed Farms

Suggested Citation

Delpierre, Matthieu and Guirkinger, Catherine and Platteau, Jean‐Philippe, Risk as Impediment to Privatization? The Role of Collective Fields in Extended Agricultural Households (October 2017). CEPR Discussion Paper No. DP12344, Available at SSRN: https://ssrn.com/abstract=3049900

Matthieu Delpierre (Contact Author)

Regional Government of Wallonia, Belgium - Institut wallon de l'Evaluation, de la Prospective et de la Statistique (IWEPS) ( email )

Place de la Wallonie, 1 Bat II
5100 Jambes
Belgium

Catherine Guirkinger

University of Namur - Department of Economics ( email )

8 Rempart de la Vierge
Namur, 5000
Belgium

Jean‐Philippe Platteau

University of Namur ( email )

8 rempart de la vierge
Namur, 5000
Belgium

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