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Rethinking The Demand For Institutional Innovation Land Rights And Land Markets In The West African Sahel

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  • Frederic ZIMMERMAN
  • Michael R. CARTER

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Abstract

In contrast to literature which focuses on the how collective action problems inhibit the supply of efficient institutions, this paper uses dynamic stochastic general equilibrium methods to study the demand for institutional innovation. Focusing on the innovation of alienabile land rights in the West African Sahel, this microeconomic approach offers several contributions to the theory of institutional innovation. First, in contrast to the representative agent or aggregate benefit-cost approaches used to derive the demand for institutional innovation in much of the literature, this paper explores the heterogeneity of demand across agents. Second, in contrast to prior studies of the evolution of land rights, this analysis shows that, in West Africa at least, the demand for private property rights in land is likely to rest on more than generalized land scarcity. Indeed, in terms of this paper's dynamic option value metric, the strongest demand for a land market emanates from the collapse of traditional risk management institutions and the desire of low wealth agents to use the market to buffer unmediated production risk. The demand for marketable rights, and indeed the appearance of some land transactions, may ultimately reflect a displaced demand for the innovation of contingency and other financial markets. In this second best environment, a policy of land privatization may be dominated by a policy that addresses those elements in the economic and institutional environment which create the sharp (displaced) demand for marketability rights.

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Bibliographic Info

Paper provided by University of Wisconsin Madison, AAE in its series Staff Papers with number 400.

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Date of creation: Aug 1996
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Handle: RePEc:wop:wiaesp:400

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Postal: University of Wisconsin, Dept. of Agricultural and Applied Economics, 427 Lorch Street, Madison, WI 53706
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Web page: http://www.aae.wisc.edu/
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Cited by:
  1. Shouying Liu & MICHAEL R. CARTER & Yang Yao, 1996. "Dimensions and Diversity of Property Rights in Rural China: Delimmas on the Road to Further Reform," Wisconsin-Madison Agricultural and Applied Economics Staff Papers 395, Wisconsin-Madison Agricultural and Applied Economics Department.
  2. Krusekopf, Charles C., 2002. "Diversity in land-tenure arrangements under the household responsibility system in China," China Economic Review, Elsevier, vol. 13(2-3), pages 297-312.

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