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Vertical integration in Mexican community forestry

Author

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  • Antinori, Camille M.
  • Rausser, Gordon C.

Abstract

While research has revealed the role of common property in risk diversification, poverty alleviation and resource management, few studies identify how common property management systems fill that role uniquely where market mechanisms or private property rights fail. To address that gap, the present research develops a consistent framework for analyzing local level production where community organizations have vertically integrated into the wood products industry, using common property forest as a source of raw material. Based on an incomplete contracting approach, it is argued that vertical integration allows local stakeholders to guide development within their community, provided that marginal productivity attains a certain level. Empirical results using a survey of 44 community governance regimes in Oaxaca, Mexico, show that communities are more likely to integrate forward into timber processing activities when they achieve initial levels of human and and social capital and increase labor productivity through higher forest land endowments. The model is extended to demonstrate that economies of scope arise between community-level timber production and non-timber benefits.

Suggested Citation

  • Antinori, Camille M. & Rausser, Gordon C., 2000. "Vertical integration in Mexican community forestry," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7kd903jn, Department of Agricultural & Resource Economics, UC Berkeley.
  • Handle: RePEc:cdl:agrebk:qt7kd903jn
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    References listed on IDEAS

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    1. Jodha, N.S., 1992. "Common Property Resources; A Missing Dimension of development Strategies," World Bank - Discussion Papers 168, World Bank.
    2. Eric Maskin & Jean Tirole, 1999. "Unforeseen Contingencies and Incomplete Contracts," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 83-114.
    3. Jeffrey B. Nugent & Nicolas Sanchez, 1998. "Common Property Rights as an Endogenous Response to Risk," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(3), pages 651-657.
    4. Teece, David J., 1980. "Economies of scope and the scope of the enterprise," Journal of Economic Behavior & Organization, Elsevier, vol. 1(3), pages 223-247, September.
    5. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    6. Rongxin Chen, 1996. "Technological Expansion: the Interaction Between Diversification Strategy and Organizational Capability," Journal of Management Studies, Wiley Blackwell, vol. 33(5), pages 649-666, September.
    7. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
    8. Hanson, Gordon H, 1995. "Incomplete Contracts, Risk, and Ownership," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(2), pages 341-363, May.
    9. Lueck, Dean, 1994. "Common property as an egalitarian share contract," Journal of Economic Behavior & Organization, Elsevier, vol. 25(1), pages 93-108, September.
    10. Armour, Henry Ogden & Teece, David J, 1980. "Vertical Integration and Technological Innovation," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 470-474, August.
    11. Panzar, John C & Willig, Robert D, 1981. "Economies of Scope," American Economic Review, American Economic Association, vol. 71(2), pages 268-272, May.
    12. Fox, Jonathan, 1996. "How does civil society thicken? the political construction of social capital in rural Mexico," World Development, Elsevier, vol. 24(6), pages 1089-1103, June.
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    Cited by:

    1. Antinori, Camille M. & Rausser, Gordon C., 2003. "Does Community Involvement Matter? How Collective Choice Affects Forests in Mexico," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt83j385n0, Department of Agricultural & Resource Economics, UC Berkeley.

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