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Contract flexibility and conflict resolution: evidence from African manufacturing

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  • Paul Collier
  • Marcel Fafchamps
  • Francis Teal
  • Stefan Dercon

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 University of Oxford, Department of Economics in its series Economics Series Working Papers with number WPS/1998-21.

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Date of creation: 01 Sep 1998
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Handle: RePEc:oxf:wpaper:wps/1998-21

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  1. Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, American Economic Association, vol. 86(4), pages 830-51, September.
  2. Marcel Fafchamps Jan Willem Gunning & Remco Oostendorp, . "Inventories, Liquidity, and Contractual Risk in African Manufacturing," Working Papers, Stanford University, Department of Economics 97020, Stanford University, Department of Economics.
  3. Angus Deaton, 1989. "Saving and Liquidity Constraints," NBER Working Papers 3196, National Bureau of Economic Research, Inc.
  4. Fafchamps, Marcel & Lund, Susan, 2003. "Risk-sharing networks in rural Philippines," Journal of Development Economics, Elsevier, Elsevier, vol. 71(2), pages 261-287, August.
  5. Zeldes, Stephen P, 1989. "Optimal Consumption with Stochastic Income: Deviations from Certainty Equivalence," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 104(2), pages 275-98, May.
  6. Fafchamps, Marcel, 1997. "Trade credit in Zimbabwean manufacturing," World Development, Elsevier, Elsevier, vol. 25(5), pages 795-815, May.
  7. 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, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(1), pages 117-36, February.
  8. Udry, Christopher, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 61(3), pages 495-526, July.
  9. 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.
  10. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, American Economic Association, vol. 83(3), pages 525-48, June.
  11. Kahn, James A, 1987. "Inventories and the Volatility of Production," American Economic Review, American Economic Association, American Economic Association, vol. 77(4), pages 667-79, September.
  12. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, American Economic Association, vol. 74(3), pages 433-44, June.
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Cited by:
  1. Jan Willem Gunning, 2005. "Pourquoi donner de l'aide ?," Revue d’économie du développement, De Boeck Université, vol. 19(2), pages 7-50.
  2. 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.
  3. Ehie, Ike C., 2010. "The impact of conflict on manufacturing decisions and company performance," International Journal of Production Economics, Elsevier, Elsevier, vol. 126(2), pages 145-157, August.
  4. Barr, Abigail, 2004. "Forging Effective New Communities: The Evolution of Civil Society in Zimbabwean Resettlement Villages," World Development, Elsevier, Elsevier, vol. 32(10), pages 1753-1766, October.
  5. Fafchamps, Marcel, 2000. "Ethnicity and credit in African manufacturing," Journal of Development Economics, Elsevier, Elsevier, vol. 61(1), pages 205-235, February.
  6. Bigsten, Arne & Kimuyu, Peter & Lundvall, Karl, 2000. "Informality, Ethnicity and Productivity: Evidence from Small Manufacturers in Kenya," Working Papers in Economics, University of Gothenburg, Department of Economics 27, University of Gothenburg, Department of Economics.

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