Social Ties and the Efficiency of Factor Transfers

42 Pages Posted: 1 Dec 2015

See all articles by Ulrik Beck

Ulrik Beck

University of Copenhagen

Benedikte Bjerge

University of Copenhagen

Marcel Fafchamps

Stanford University - Freeman Spogli Institute for International Studies

Date Written: November 2015

Abstract

We introduce a novel way of testing whether social and geographical proximity helps or hinders efficiency-enhancing factor transfers. The approach is implemented empirically using unusually rich data collected in The Gambia. We find that membership to the same ethnic group or kinship network is associated with fewer efficient transfers. This is primarily driven by land transfers from a few large land-owners. If the presence of large landowners is controlled for, the finding is reversed. There are more efficiency-enhancing land transfers between kin-related households and between neighbors. Labor transfers are not found to equilibrate factor ratios across households. But we do not rule out that they serve a beneficial role, e.g., to deal with unanticipated health shocks. Allocative efficiency in land and labor is not achieved at the village level, which suggests that social ties are not sufficiently fluid to permit a fully efficient reallocation of factors of production within villages.

Keywords: allocative efficiency, factor markets, land markets, social networks

JEL Classification: C21, D85, O12

Suggested Citation

Beck, Ulrik and Bjerge, Benedikte and Fafchamps, Marcel, Social Ties and the Efficiency of Factor Transfers (November 2015). CEPR Discussion Paper No. DP10957, Available at SSRN: https://ssrn.com/abstract=2697590

Ulrik Beck (Contact Author)

University of Copenhagen ( email )

Nørregade 10
Copenhagen, København DK-1165
Denmark

Benedikte Bjerge

University of Copenhagen ( email )

Marcel Fafchamps

Stanford University - Freeman Spogli Institute for International Studies ( email )

Stanford, CA 94305
United States

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