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Incentives Embedded in Institutions: The Case of Share Contracts in Ghanaian Cocoa Production

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  • Takane, Tsutomu
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    Abstract

    Providing price incentives to farmers is usually considered essential for agricultural development. Although such incentives are important, regarding price as the sole explanatory factor is far from satisfactory in understanding the complex realities of agricultural production in Africa. By analyzing the share contracts widely practiced in Ghana, this article argues that local institutions such as land tenure systems and agrarian contracts provide strong incentives and disincentives for agricultural production. Based on data derived from fieldwork in the 1990s, the study analyzes two types of share contracts and the incentive structures embedded in them. The analysis reveals that farmers' investment behavior needs to be understood in terms of both short-term incentive to increase yield and long-term incentive to strengthen land rights. The study concludes that the role of price incentives in agricultural production needs to be reconsidered by placing it in wider incentive structures embedded in local institutions.

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    Bibliographic Info

    Article provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its journal The Developing Economies.

    Volume (Year): 38 (2000)
    Issue (Month): 3 (September)
    Pages: 374-397

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    Handle: RePEc:jet:deveco:v:38:y:2000:i:3:p:374-397

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    Related research

    Keywords: Cacao; Rural societies; Farm management; Ghana;

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    1. Lisa C. Smith & Jean-Paul Chavas, 1997. "Commercialization and the Balance of Women's Dual Roles in Non-Income-Pooling West African Households," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 589-594.
    2. Kikuchi, Masao & Hayami, Yujiro, 1999. "Technology, Market, and Community in Contract Choice: Rice Harvesting in the Philippines," Economic Development and Cultural Change, University of Chicago Press, vol. 47(2), pages 371-86, January.
    3. Braverman, Avishay & Stiglitz, Joseph E, 1982. "Sharecropping and the Interlinking of Agrarian Markets," American Economic Review, American Economic Association, vol. 72(4), pages 695-715, September.
    4. Nabli, Mustapha K. & Nugent, Jeffrey B., 1989. "The New Institutional Economics and its applicability to development," World Development, Elsevier, vol. 17(9), pages 1333-1347, September.
    5. Leach, Melissa & Mearns, Robin & Scoones, Ian, 1999. "Environmental Entitlements: Dynamics and Institutions in Community-Based Natural Resource Management," World Development, Elsevier, vol. 27(2), pages 225-247, February.
    6. Seiichi Fukui, 1997. "The Meaning of Kinship in Sharecropping Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 394-406.
    7. Besley, Timothy, 1995. "Property Rights and Investment Incentives: Theory and Evidence from Ghana," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 903-37, October.
    8. Hoff, Karla, 2008. "Joseph E. Stiglitz," Policy Research Working Paper Series 4478, The World Bank.
    9. Taslim, M. A., 1988. "Tenancy and interlocking markets: issues and some evidence," World Development, Elsevier, vol. 16(6), pages 655-666, June.
    10. Bateman, Merrill J. & Meeraus, Alexander & Newbery, David M. & Okyere, William Asenso & O'Mara, Gerald T., 1990. "Ghana's cocoa pricing policy," Policy Research Working Paper Series 429, The World Bank.
    11. Bardhan, Pranab, 1989. "The new institutional economics and development theory: A brief critical assessment," World Development, Elsevier, vol. 17(9), pages 1389-1395, September.
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