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Inequality, Control Rights, and Rent Seeking: Sugar Cooperatives in Maharashtra

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Author Info
Abhijit Banerjee
Dilip Mookherjee
Kaivan Munshi
Debraj Ray

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Abstract

This paper presents a theory of rent seeking within farmer cooperatives in which inequality of asset ownership affects relative control rights of different groups of members. The two key assumptions are constraints on lump-sum transfers from poorer members and disproportionate control rights wielded by wealthier members. Transfers of rents to the latter are achieved by depressing prices paid for inputs supplied by members and diverting resulting retained earnings. The theory predicts that increased heterogeneity of landholdings in the local area causes increased inefficiency by inducing a lower input price and a lower level of installed crushing capacity. Predictions concerning the effect of the distribution of local landownership on sugarcane price, capacity levels, and participation rates of different classes of farmers are confirmed by data from nearly 100 sugar cooperatives in the Indian state of Maharashtra over the period 197193.

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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 109 (2001)
Issue (Month): 1 (February)
Pages: 138-190
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Handle: RePEc:ucp:jpolec:v:109:y:2001:i:1:p:138-190

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  1. C. Mónica Capra & Tomomi Tanaka & Colin Camerer & Lauren Munyan & Veronica Sovero & Lisa Wang & Charles Noussair, 2005. "The Impact of Simple Institutions in Experimental Economies with Poverty Traps," Emory Economics 0508, Department of Economics, Emory University (Atlanta). [Downloadable!]
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  2. Sanghamitra Das & Dilip Mookherjee, 2004. "Ownership Form and Contractual Enefficiency: Comparing Performance of Cooperatives and Private Factories in the Indian Sugar Industry," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-139, Boston University - Department of Economics. [Downloadable!]
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  3. Jacoby, Hanan G. & Murgai, Rinku & Rehman, Saeed Ur, 2001. "Monopoly power and distribution in fragmented markets : the case of groundwater," Policy Research Working Paper Series 2628, The World Bank. [Downloadable!]
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  4. Dilip Mookherjee & Pranab Bardhan, 2005. "Decentralization, Corruption And Government Accountability: An Overview," Boston University - Department of Economics - Working Papers Series WP2005-023, Boston University - Department of Economics, revised Jun 2005. [Downloadable!]
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  5. Dwayne Benjamin & Loren Brandt & John Giles, 2006. "Inequality and Growth in Rural China: Does Higher Inequality Impede Growth?," IZA Discussion Papers 2344, Institute for the Study of Labor (IZA). [Downloadable!]
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  6. Dilip Mookherjee & Debraj Ray, 2002. "Contractual Structure and Wealth Accumulation," American Economic Review, American Economic Association, vol. 92(4), pages 818-849, September. [Downloadable!]
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  7. Chang-Tai Hsieh & Enrico Moretti, 2005. "Did Iraq Cheat the United Nations? Underpricing, Bribes, and the Oil for Food Program," NBER Working Papers 11202, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Gradstein, Mark, 2004. "Inequality, Democracy and the Emergence of Institutions," CEPR Discussion Papers 4187, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  9. Nancy Birdsall, 2007. "Income Distribution: Effects on Growth and Development," Working Papers 118, Center for Global Development. [Downloadable!]
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