Advanced Search
MyIDEAS: Login

Of Pirates and Moneylenders: Product Market Competition and the Depth of Lending relationships in a rural market in Chile

Contents:

Author Info

Abstract

It is often suggested that interlinked and monitored loan contract terms such as those used by trader-lenders in rural markets serve as collateral substitutes and therefore should benefit asset-poor borrowers in particular. Yet, empirically this is not always true. For example, most of the new monitored finance from contract farming firms and agro-industry traders during ChileÂ’s recent agricultural boom went to medium and large commercial farmers and traditional forms of monitored finance for collateral poor farmers from informal trader-moneylenders actually may have declined. Based on interviews and historical accounts of this market and the analysis of a theoretical model, this paper argues that lenders may have been forced to reduce tied-credit to small farmers in several crops because increased product market competition exacerbated the problem of "pirates sales'' or post-harvest opportunistic default. This further restricted the already narrow set of enforceable property claims upon which monitored credit contracts to solve ex-ante moral hazard contracting problems could have been fashioned. This problem was avoided in crops where product markets are more concentrated and in export activities where crop liens are easier to establish with better capitalized farmers. The model points to an important connection between the nature of market competition and the depth of lending relationships that appears to be important in many other contexts.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://web.williams.edu/Economics/wp/pirate.pdf
File Function: Full text
Download Restriction: no

Bibliographic Info

Paper provided by Department of Economics, Williams College in its series Department of Economics Working Papers with number 2000-08.

as in new window
Length: 51 pages
Date of creation: Jul 2001
Date of revision:
Handle: RePEc:wil:wileco:2000-08

Contact details of provider:
Postal: Williamstown, MA 01267
Phone: 413 597 2476
Fax: 413 597 4045
Email:
Web page: http://econ.williams.edu
More information through EDIRC

Order Information:
Email:

Related research

Keywords: Financial intermediation; monitored lending; moral hazard and costly state verification; Chile;

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Marcel Fafchamps, 2009. "Vulnerability, Risk Management, and Agricultural Development," CSAE Working Paper Series 2009-11, Centre for the Study of African Economies, University of Oxford.
  2. Swinnen, Johan F.M. & Vandeplas, Anneleen, 2007. "Contracting, Competition, and Rent Distribution Theory and Empirical Evidence from Developing and Transition Countries," 103rd Seminar, April 23-25, 2007, Barcelona, Spain 9413, European Association of Agricultural Economists.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wil:wileco:2000-08. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stephen Sheppard).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.