Incentives and moral hazard: plot level productivity of factory-operated and outgrower-operated sugarcane production in Ethiopia

Publikation: Working paperForskning

Standard

Incentives and moral hazard : plot level productivity of factory-operated and outgrower-operated sugarcane production in Ethiopia. / Wendimu, Mengistu Assefa; Henningsen, Arne; Czekaj, Tomasz Gerard.

Frederiksberg : Department of Food and Resource Economics, University of Copenhagen, 2015.

Publikation: Working paperForskning

Harvard

Wendimu, MA, Henningsen, A & Czekaj, TG 2015 'Incentives and moral hazard: plot level productivity of factory-operated and outgrower-operated sugarcane production in Ethiopia' Department of Food and Resource Economics, University of Copenhagen, Frederiksberg. <http://econpapers.repec.org/RePEc:foi:wpaper:2015_02>

APA

Wendimu, M. A., Henningsen, A., & Czekaj, T. G. (2015). Incentives and moral hazard: plot level productivity of factory-operated and outgrower-operated sugarcane production in Ethiopia. Department of Food and Resource Economics, University of Copenhagen. IFRO Working Paper Nr. 2015/02 http://econpapers.repec.org/RePEc:foi:wpaper:2015_02

Vancouver

Wendimu MA, Henningsen A, Czekaj TG. Incentives and moral hazard: plot level productivity of factory-operated and outgrower-operated sugarcane production in Ethiopia. Frederiksberg: Department of Food and Resource Economics, University of Copenhagen. 2015.

Author

Wendimu, Mengistu Assefa ; Henningsen, Arne ; Czekaj, Tomasz Gerard. / Incentives and moral hazard : plot level productivity of factory-operated and outgrower-operated sugarcane production in Ethiopia. Frederiksberg : Department of Food and Resource Economics, University of Copenhagen, 2015. (IFRO Working Paper; Nr. 2015/02).

Bibtex

@techreport{41a37cf0e25c4d3c9ae06a3973ee8cb6,
title = "Incentives and moral hazard: plot level productivity of factory-operated and outgrower-operated sugarcane production in Ethiopia",
abstract = "We investigate the unique contractual arrangement between a large Ethiopian sugar factory and its adjacent outgrower associations. The only significant difference between the sugarcane production on the factory-operated sugarcane plantation and on the outgrower-operated plots is the remuneration system and thus, the incentives to the workers. We compare the productivity of the factory-operated plantation with the outgrower-operated plots based on a new cross-sectional plot-level data set that includes all plots that are operated by the sugar factory and its adjacent outgrower associations. As sugar-cane production depends on various exogenous factors that are measured as categorical variables (e.g. soil type, cane variety, etc.), we estimate the production function by a nonparametric kernel regression method that takes into account both continuous and categorical explanatory variables without assuming a functional form and without imposing restrictions on interactions between the explanatory variables. In order to obtain meaningful productivity measures, we impose monotonicity in input quantities using the constrained weighted bootstrapping (CWB) method. Our results show that outgrower-operated plots have−ceteris paribus−a statistically and economically significantly higher productivity than factory-operated plots, which can be explained by outgrowers having stronger incentives to put more effort into their work than the employees of the sugar factory.",
author = "Wendimu, {Mengistu Assefa} and Arne Henningsen and Czekaj, {Tomasz Gerard}",
year = "2015",
language = "English",
series = "IFRO Working Paper",
publisher = "Department of Food and Resource Economics, University of Copenhagen",
number = "2015/02",
type = "WorkingPaper",
institution = "Department of Food and Resource Economics, University of Copenhagen",

}

RIS

TY - UNPB

T1 - Incentives and moral hazard

T2 - plot level productivity of factory-operated and outgrower-operated sugarcane production in Ethiopia

AU - Wendimu, Mengistu Assefa

AU - Henningsen, Arne

AU - Czekaj, Tomasz Gerard

PY - 2015

Y1 - 2015

N2 - We investigate the unique contractual arrangement between a large Ethiopian sugar factory and its adjacent outgrower associations. The only significant difference between the sugarcane production on the factory-operated sugarcane plantation and on the outgrower-operated plots is the remuneration system and thus, the incentives to the workers. We compare the productivity of the factory-operated plantation with the outgrower-operated plots based on a new cross-sectional plot-level data set that includes all plots that are operated by the sugar factory and its adjacent outgrower associations. As sugar-cane production depends on various exogenous factors that are measured as categorical variables (e.g. soil type, cane variety, etc.), we estimate the production function by a nonparametric kernel regression method that takes into account both continuous and categorical explanatory variables without assuming a functional form and without imposing restrictions on interactions between the explanatory variables. In order to obtain meaningful productivity measures, we impose monotonicity in input quantities using the constrained weighted bootstrapping (CWB) method. Our results show that outgrower-operated plots have−ceteris paribus−a statistically and economically significantly higher productivity than factory-operated plots, which can be explained by outgrowers having stronger incentives to put more effort into their work than the employees of the sugar factory.

AB - We investigate the unique contractual arrangement between a large Ethiopian sugar factory and its adjacent outgrower associations. The only significant difference between the sugarcane production on the factory-operated sugarcane plantation and on the outgrower-operated plots is the remuneration system and thus, the incentives to the workers. We compare the productivity of the factory-operated plantation with the outgrower-operated plots based on a new cross-sectional plot-level data set that includes all plots that are operated by the sugar factory and its adjacent outgrower associations. As sugar-cane production depends on various exogenous factors that are measured as categorical variables (e.g. soil type, cane variety, etc.), we estimate the production function by a nonparametric kernel regression method that takes into account both continuous and categorical explanatory variables without assuming a functional form and without imposing restrictions on interactions between the explanatory variables. In order to obtain meaningful productivity measures, we impose monotonicity in input quantities using the constrained weighted bootstrapping (CWB) method. Our results show that outgrower-operated plots have−ceteris paribus−a statistically and economically significantly higher productivity than factory-operated plots, which can be explained by outgrowers having stronger incentives to put more effort into their work than the employees of the sugar factory.

M3 - Working paper

T3 - IFRO Working Paper

BT - Incentives and moral hazard

PB - Department of Food and Resource Economics, University of Copenhagen

CY - Frederiksberg

ER -

ID: 138467873