Research of Members

Menusch Khadjavi, Kacana Sipangule Khadjavi, and Rainer Thiele (2021). Social Capital and Large-Scale Agricultural Investments: An Experimental Investigation. The Economic Journal, Volume 131, Issue 633, Pages 420–449

Following the 2007–2008 global food crisis, agricultural producers have invested in large tracts of land in developing countries. We investigate how the arrival of large-scale farms changes inter-personal trust and reciprocity, important components of social capital, in traditional Zambian villages. Using experimental methods, we elicit trust and reciprocal behaviour in villages that lie near large-scale farms and compare them with control villages at a distance. Our data reveal greater trust in villages close to large-scale farms, which is in line with communal coping as a response to the arrival of the large farms. Reciprocity is more frequent after farm employment, which points to reputation building.  

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Danzer, Alexander M., Robert Grundke (2020). „Export price shocks and rural labor markets: The role of labor market distortions.” Journal of Development Economics, 2020, Volume 145, 102464

Interview with a group of field workers in the Konibodom district in northern Tajikistan
© Robert Grundke

Can workers in developing countries take advantage of trade? Alexander M. Danzer (KU Eichstätt-Ingolstadt) and Robert Grundke (OECD) answer this question by using fluctuations in the world market price for cotton and identifying the effects of higher export prices on the wages of poor agricultural workers in the cotton harvest, using the example of Tajikistan. The increased demand for workers during the high price episode doubles wages for cotton pickers on small private farms, but has no impact on wages on large parastatal farms. The different treatment of workers is due to market power and the continued use of coerced labor in large companies during the cotton harvest, not least of school children and university students. The research concludes that trade produces winners and losers based on the political power relations between local decision makers and managers of parastatal farms.

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Heß, Simon, Dany Jaimovich, and Matthias Schündeln. "Development projects and economic networks: Lessons from rural Gambia." The Review of Economic Studies (2021)

The authors study the effect of participatory development projects on social and economic networks in rural villages in The Gambia. Participatory development projects actively involve villagers in financing and decision-making processes, intending to create more effective projects and to strengthen local institutions. These projects, in particular Community-Driven Development (CDD) projects, are a major form of international donor activity. As of March 2021, the World Bank alone supports 327 CDD projects in 90 countries, lending over 33 billion US$. Thus, it is important to understand the effects of such projects on local communities. Existing research on the intended effects of CDD projects is limited in breadth and typically finds moderate positive effects at best. At the same time, CDD projects risk having unintended negative effects, e.g. through their interactions with local power structures and decision-making mechanisms, or through unequally distributed benefits.

The authors first argue theoretically that the effects of CDD projects on decision-making processes and unequal economic outcomes can translate into effects on social and economic networks. To study the effect of CDD projects on networks empirically, the authors utilize the random allocation of a CDD project to villages in The Gambia. They collected detailed data on social and economic interactions in 56 villages, half of which had received CDD projects in the past. The central empirical finding is that the density of social and economic networks in program villages is lower than in non-program villages. Given the importance of these informal networks for risk-sharing (e.g., in case of an illness), the reduced density of networks implies a negative effect on expected household welfare. Further empirical analyses suggest that elite capture (i.e., the appropriation of project gains by village elites) contributed to the problem of unequally distributed benefits from the project, which in turn led to conflicts, thus weakening the networks. Overall, the results demonstrate possible unintended negative consequences of participatory development projects.

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“Is There a Rainbow after the Rain? How Do Agricultural Shocks Affect Non‐Farm Enterprises? Evidence from Thailand” (Katharina Grabrucker and Michael Grimm, both from the University of Passau), published in the American Journal of Agricultural Economics

The authors merged detailed household panel data from the TVSEP with grid‐level precipitation data to study the indirect effects of rainfall shocks on non‐farm enterprises in rural Thailand. They focus on both forward and backward linkages along the value chain as well as direct demand effects through farmer’s consumption. Overall, their analysis shows that the costs of agricultural shocks are higher than what much of the literature has suggested so far. Despite limited market integration in poor rural economies, the spill-overs are sizable and are transmitted through various channels. One implication is that safety nets targeted at farms may need to consider non‐farm enterprises too.

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