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Inequality, control Rights and Rent Seeking - A Theoretical and Empirical Analysis of Sugar Cooperatives in Maharashtra

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  • Abhijit Banerjee
  • Dilip Mookherjee
  • Kaivan Munshi
  • Debraj Ray

Abstract

This paper presents a theory of rent-seeking within farmer cooperatives in which inequality of asset ownership affects relative control rights of different groups of members. The two key assumptions are constraints on lumpsum transfers from poorer members and disproportionate control rights wielded by wealthier members. Transfer of rents to the latter are achieved by depressing prices paid for inputs supplied by members and diverting resulting retained earnings. The theory predicts that increased heterogeneity of landholdings in the local area causes increased inefficiency, by inducing a lower input price and lower level of installed crushing capacity. Predictions concerning input price, capacity levels and participation rates of different classes of farmers are confirmed by data from nearly one hundred sugar cooperatives in the Indian state of Maharashtra over the period 1971-93.

Suggested Citation

  • Abhijit Banerjee & Dilip Mookherjee & Kaivan Munshi & Debraj Ray, 1997. "Inequality, control Rights and Rent Seeking - A Theoretical and Empirical Analysis of Sugar Cooperatives in Maharashtra," Boston University - Institute for Economic Development 80, Boston University, Institute for Economic Development.
    • Handle: RePEc:fth:bosecd:80
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Inequality, Globalization, and Economic Growth
      by Mark Thoma in Economist's View on 2007-07-07 15:24:00
    2. Inequality and growth
      by chris dillow in Stumbling and Mumbling on 2007-06-22 17:58:10

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    Cited by:

    1. Ray, Isha & Williams, Jeffrey, 2002. "Locational asymmetry and the potential for cooperation on a canal," Journal of Development Economics, Elsevier, vol. 67(1), pages 129-155, February.
    2. Deininger, Klaus, 1999. "Making Negotiated Land Reform Work: Initial Experience from Colombia, Brazil and South Africa," World Development, Elsevier, vol. 27(4), pages 651-672, April.
    3. Hart, Oliver & Moore, John, 1998. "Cooperatives vs. outside ownership," LSE Research Online Documents on Economics 19360, London School of Economics and Political Science, LSE Library.
    4. Rey, Patrick & Tirole, Jean, 2001. "Alignement of Interests and the Governance of Joint Ventures," IDEI Working Papers 441, Institut d'Économie Industrielle (IDEI), Toulouse.
    5. Dayton-Johnson, Jeff, 2000. "Determinants of collective action on the local commons: a model with evidence from Mexico," Journal of Development Economics, Elsevier, vol. 62(1), pages 181-208, June.
    6. Deininger, Klaus, 1999. "Making negotiated land reform work : initial experience from Brazil, Colombia, and South Africa," Policy Research Working Paper Series 2040, The World Bank.
    7. Theesfeld, Insa & Pirscher, Frauke (ed.), 2011. "Perspectives on institutional change - water management in Europe," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 58, number 109519.

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