Social networks and factor markets: panel data evidence from Ethiopia

Research output: Working paperResearch

Documents

Kibrom Araya Abay, Goytom Abraha Kahsay, Guush Berhane

In the absence of well-established factor markets, the role of indigenous institutions and social networks can be substantial for mobilizing factors for agricultural production. We investigate the role of an indigenous social network in Ethiopia, the iddir, in facilitating factor market transactions among smallholder farmers. Using detailed longitudinal household survey data and employing a difference-in-differences approach, we find that iddir membership improves households’ access to factor markets. Specifically, we find that joining an iddir network improves households’ access to land, labor and credit transactions between 7 and 11 percentage points. Furthermore, our findings also indicate that iddir networks crowd-out borrowing from local moneylenders (locally referred as Arata Abedari), a relatively expensive credit source, virtually without affecting borrowing from formal credit sources. These results point out the roles non-market arrangements, such as social networks, can play in mitigating market inefficiencies in poor rural markets.
Original languageEnglish
Place of PublicationFrederiksberg
PublisherDepartment of Food and Resource Economics, University of Copenhagen
Number of pages39
Publication statusPublished - 2014
SeriesIFRO Working Paper
Number2014/12

Number of downloads are based on statistics from Google Scholar and www.ku.dk


No data available

ID: 134753985