Crony Capitalism, Collective Action, and ICT: Evidence from Kenyan Contract Farming

Out­line

The shift from sub­sis­tence to com­mer­cial economies cre­ates sur­plus, but of­ten in­duces con­flict over it. Un­der ex­trac­tive in­sti­tu­tions and weak con­tract en­force­ment, crony cap­i­tal­ism may emerge and lim­it the ben­e­fits of mod­ern­iza­tion. We ex­am­ine the re­la­tion­ship be­tween a large sug­ar cane con­tract farm­ing com­pa­ny and small farm­ers in West­ern Kenya, in a set­ting with many fea­tures of crony cap­i­tal­ism. We doc­u­ment fre­quent vi­o­la­tions of the com­pa­ny’s con­trac­tu­al oblig­a­tions and pro­pose a sim­ple the­o­ry of how farm­ers’ col­lec­tive ac­tion prob­lems may make it hard­er to en­force con­tracts. We then test the di­rect ef­fects of an ICT-based in­ter­ven­tion that re­duces farm­ers’ cost of com­plain­ing, po­ten­tial­ly ad­dress­ing com­pa­ny’s moral haz­ard and farm­ers’ free rid­ing prob­lems.

Re­search Team

Author

Lorenzo Casaburi

Associate Professor of Development Economics

Zurich ZCED

Michael Kre­mer

Har­vard Uni­ver­si­ty

Ravin­dra Ram­rat­tan

In­no­va­tions for Pover­ty Ac­tion