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Inequality, control Rights and Rent Seeking - A Theoretical and Empirical Analysis of Sugar Cooperatives in Maharashtra

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  • Abhijit Banerjee
  • Dilip Mookherjee
  • Kaivan Munshi
  • Debraj Ray

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 lumpsum transfers from poorer members and disproportionate control rights wielded by wealthier members. Transfer 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 lower level of installed crushing capacity. Predictions concerning input price, capacity levels and participation rates of different classes of farmers are confirmed by data from nearly one hundred sugar cooperatives in the Indian state of Maharashtra over the period 1971-93.

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Bibliographic Info

Paper provided by Boston University, Institute for Economic Development in its series Boston University - Institute for Economic Development with number 80.

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Date of creation: Oct 1997
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Handle: RePEc:fth:bosecd:80

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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Inequality and growth
    by chris dillow in Stumbling and Mumbling on 2007-06-22 12:58:10
  2. Inequality, Globalization, and Economic Growth
    by Mark Thoma in Economist's View on 2007-07-07 10:24:00
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Cited by:
  1. Deininger, Klaus, 1999. "Making Negotiated Land Reform Work: Initial Experience from Colombia, Brazil and South Africa," World Development, Elsevier, vol. 27(4), pages 651-672, April.
  2. Oliver Hart & John Moore, 1998. "Cooperatives vs. Outside Ownership," STICERD - Theoretical Economics Paper Series 346, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  3. Deininger, Klaus, 1999. "Making negotiated land reform work : initial experience from Brazil, Colombia, and South Africa," Policy Research Working Paper Series 2040, The World Bank.

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