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Contract flexibility and conflict resolution: evidence from African manufacturing

  • Paul Collier
  • Marcel Fafchamps
  • Francis Teal
  • Stefan Dercon

This paper examines the contractual practices of African manufacturing firms using survey data collected in Burundi, Cameroon, Ghana, Ivory Coast, Kenya, Zambia and Zimbabwe. Descriptive statistics and econometric results are presented. They show that contractual flexibility is pervasive and that relational contracting is the norm between manufacturers, their suppliers, and their clients. The existence of long-term relations between firms helps them deal with contract non-performance through negotiation. Confrontational methods such as lawyers and courts are used when negotiations fail. Whenever confrontation can be avoided, business is resumed.

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File URL: http://www.csae.ox.ac.uk/workingpapers/pdfs/9821text.pdf
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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number WPS/1998-21.

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Date of creation: 01 Sep 1998
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Handle: RePEc:oxf:wpaper:wps/1998-21
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  1. Kahn, James A, 1987. "Inventories and the Volatility of Production," American Economic Review, American Economic Association, vol. 77(4), pages 667-79, September.
  2. Deaton, A., 1989. "Saving And Liquidity Constraints," Papers 153, Princeton, Woodrow Wilson School - Public and International Affairs.
  3. Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, vol. 86(4), pages 830-51, September.
  4. Krane, Spencer D, 1994. "The Distinction between Inventory Holding and Stockout Costs: Implications for Target Inventories, Asymmetric Adjustment, and the Effect of Aggregation on Production Smoothing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(1), pages 117-36, February.
  5. Marcel Fafchamps & Susan Lund, 2000. "Risk-Sharing Networks in Rural Philippines," Economics Series Working Papers 10, University of Oxford, Department of Economics.
  6. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June.
  7. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  8. Marcel Fafchamps Jan Willem Gunning & Remco Oostendorp, . "Inventories, Liquidity, and Contractual Risk in African Manufacturing," Working Papers 97020, Stanford University, Department of Economics.
  9. Fafchamps, Marcel, 1997. "Trade credit in Zimbabwean manufacturing," World Development, Elsevier, vol. 25(5), pages 795-815, May.
  10. Udry, Christopher, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 495-526, July.
  11. Stephen Zeldes, . "Optimal Consumption with Stochastic Income: Deviations from Certainty Equivalence," Rodney L. White Center for Financial Research Working Papers 20-86, Wharton School Rodney L. White Center for Financial Research.
  12. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
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