Property rights in a flea market economy
AbstractThis paper studies liberalised grain markets in Madagascar and examines how property rights are protected and contracts are enforced among agricultural traders. We find that the incidence of theft and breach of contract is low, and that the losses resulting from such instances are small. This, however, does not result from reliance on legal institutions - actual recourse to police and courts are fairly rare, except in cases of theft - but from traders` reluctance to expose themselves to malfeasance. As a result, Malagasy grain trade has high transactions costs, and little or no forward contracting. The dominant contract enforcement mechanism is trust-based relationships. Trust is established primarily through repeated interaction with little role for referral by other traders. Information on bad clients does not circulate widely, hence severely limiting group punishments for non-payment.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number WPS/1999-25.
Date of creation: 01 Nov 1999
Date of revision:
Other versions of this item:
- Fafchamps, Marcel & Minten, Bart, 2001. "Property Rights in a Flea Market Economy," Economic Development and Cultural Change, University of Chicago Press, University of Chicago Press, vol. 49(2), pages 229-67, January.
- Marcel Fafchamps & Bart Minten, 1999. "Property rights in a flea market economy," CSAE Working Paper Series 1999-25, Centre for the Study of African Economies, University of Oxford.
- Fafchamps, Marcel & Minten, Bart, 1999. "Property rights in a flea market economy," MTID discussion papers, International Food Policy Research Institute (IFPRI) 27, International Food Policy Research Institute (IFPRI).
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