Social networks and factor misallocation in agriculture

When active, agricultural factor markets in developing countries should reduce misallocation, but do not; factor trade must be between the “wrong” farmers. We use a novel transaction-level panel dataset to examine who trades with whom in Rwandan villages. Within villages, physical distance and social connections are more important than productivity in predicting factor trade. We develop and estimate a model of factor trade in networks to characterize the frictions resolved by physical and social distance. We find social connections increase the elasticity of land rentals by reducing the cost of sustaining productive trades, and 39% of efficiency gains from land rentals are attributable to this effect. Evidence from an RCT suggests the land market frictions alleviated by social connections are not easily resolved through policy.

The seminar series is organized by the Section Economics of Wageningen University (consisting of the groups Agricultural Economics and Rural Policy, Development Economics, Urban Economics, Environmental Economics and Natural Resources, and Economic and Environmental History).

The seminar is aiming to foster the exchange on recent topics in the field of economics. We consider contributions from all fields of economic research and invite speakers from Wageningen, the Netherlands and abroad.

The seminar is organized as a weekly lunch seminar taking place on campus. Meetings are between 12:00 and 13:00 hours. Lunch is served. 

All staff and students are welcome!