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Contract flexibility and conflict resolution: Evidence from African manufacturing

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Author Info

  • Arne Bigsten
  • Paul Collier
  • Stefan Dercon
  • Marcel Fafchamps
  • Bernard Gauthier
  • Jan Willem Gunning
  • Abena Oduro
  • Remco Oostendorp
  • Catherine Pattillo
  • Måns Söderbom
  • Francis Teal
  • Albert Zeufack

Abstract

This paper examines the contractual practices of African manufacturing firms using survey data collected in Burundi, Cameroon, Ghana, Ivory Coast, Kenya, Zambia and Zimbabwe. Descriptive statistics and econometric results are presented. They show that contractual flexibility is pervasive and that relational contracting is the norm between manufacturers, their suppliers, and their clients. The existence of long-term relations between firms helps them deal with contract non-performance through negotiation. Confrontational methods such as lawyers and courts are used when negotiations fail. Whenever confrontation can be avoided, business is resumed.

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Bibliographic Info

Paper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 1998-21.

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Date of creation: 1998
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Handle: RePEc:csa:wpaper:1998-21

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References

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  1. Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, vol. 86(4), pages 830-51, September.
  2. Krane, Spencer D, 1994. "The Distinction between Inventory Holding and Stockout Costs: Implications for Target Inventories, Asymmetric Adjustment, and the Effect of Aggregation on Production Smoothing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(1), pages 117-36, February.
  3. Stephen Zeldes, . "Optimal Consumption with Stochastic Income: Deviations from Certainty Equivalence," Rodney L. White Center for Financial Research Working Papers 20-86, Wharton School Rodney L. White Center for Financial Research.
  4. Marcel Fafchamps & Susan Lund, . "Risk Sharing Networks in Rural Philippines," Working Papers 97014, Stanford University, Department of Economics.
  5. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
  6. Marcel Fafchamps Jan Willem Gunning & Remco Oostendorp, . "Inventories, Liquidity, and Contractual Risk in African Manufacturing," Working Papers 97020, Stanford University, Department of Economics.
  7. Fafchamps, Marcel, 1997. "Trade credit in Zimbabwean manufacturing," World Development, Elsevier, vol. 25(5), pages 795-815, May.
  8. Deaton, A., 1989. "Saving And Liquidity Constraints," Papers 153, Princeton, Woodrow Wilson School - Public and International Affairs.
  9. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  10. Udry, Christopher, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 495-526, July.
  11. Kahn, James A, 1987. "Inventories and the Volatility of Production," American Economic Review, American Economic Association, vol. 77(4), pages 667-79, September.
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Cited by:
  1. Bigsten, Arne & Kimuyu, Peter & Lundvall, Karl, 2000. "Informality, Ethnicity and Productivity: Evidence from Small Manufacturers in Kenya," Working Papers in Economics 27, University of Gothenburg, Department of Economics.
  2. Jan Willem Gunning, 2005. "Pourquoi donner de l'aide ?," Revue d’économie du développement, De Boeck Université, vol. 19(2), pages 7-50.
  3. Barr, Abigail, 2004. "Forging Effective New Communities: The Evolution of Civil Society in Zimbabwean Resettlement Villages," World Development, Elsevier, vol. 32(10), pages 1753-1766, October.
  4. Ehie, Ike C., 2010. "The impact of conflict on manufacturing decisions and company performance," International Journal of Production Economics, Elsevier, vol. 126(2), pages 145-157, August.
  5. Mezgebo, Taddese & Dereje, Fikadu, 2010. "Structure, conduct and performance of grain trading in Tigray and its impact on demand for commodity exchange: The case Maychew, Mokone, Alemata, Mekelle and Himora," MPRA Paper 24901, University Library of Munich, Germany.
  6. Fafchamps, Marcel, 2000. "Ethnicity and credit in African manufacturing," Journal of Development Economics, Elsevier, vol. 61(1), pages 205-235, February.

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