The African cash crop sector has witnessed widespread liberalisation reforms aimed at strengthening price incentives to farmers. However, some areas are confronted with a decline in input use. We have recourse to a two-stage Cournot game to account for the issue. In a context of credit rationing and imperfect contract enforceability, competition has the effect of tightening the input availability constraint while increasing the shadow value of credit. First, contrary to expectations, the impact of an extension of access to farm credit on aggregate input use, efficiency and peasants' income is shown to be ambiguous. Intuitively, relaxing the liquidity constraint entails a higher price elasticity of supply that results in a reduction of traders' profit margin. As a consequence, traders' incentives to contribute to input availability are weakened. The effects of subsidising inputs are also analysed. Second, normative insights are drawn regarding second best combinations of imperfect credit and output markets. Finally, the issue and consequences of contract unenforceability are discussed. Copyright 2009 The author 2008. Published by Oxford University Press on behalf of the Centre for the Study of African Economies. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 18 (2009) Issue (Month): 3 (June) Pages: 496-528 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF
Contact details of provider: Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK Fax: 01865 267 985 Email: Web page: http://www.jae.oupjournals.org/
Did you know? All full texts are decentralized with the publishers, none reside on this server, thus making it possible to offer this service for free to all parties.