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Development Economics
Applied Econometrics

Development Economics
Microeconomic Theory
Applied Econometrics

May, 2002 (Oral) Development Economics and Econometrics
May, 2001 (Written) Microeconomic and Macroeconomic Theory

Role of Markets and Community-based Institutions in Economic Development

Professor Robert Evenson
Professor Michael Boozer
Professor Christopher Udry

May 2006

Ph.D., Economics, Yale University, expected May 2006
M.Phil., Economics, Yale University, December 2003
M.A., Economics, Yale University, May 2002
B.Sc.(Honors), Economics, Lahore University of Management Sciences - LUMS, 2000

Yale University Dissertation Fellowship, Spring 2005
Ryoichi Sasakawa Young Leaders Fellowship, 2002–2003
Yale University Graduate Fellowship, 2000–2004
LUMS Merit Fellowship, 1998–2000
National Management Foundation Prizes, 2000, graduated first place in my field and in the bachelors program

Teaching Fellow, Principles of Microeconomics, Yale University, 2004 & 2005
Teaching Fellow, Graduate Microeconomics, Yale University, 2005
Instructor, Applied Econometrics, LUMS, Summer 2002

Computing Assistant, Information Technology Services, Yale University, 2004–2006
Consultant, World Bank, Pakistan Rural Household Survey Project, Summer 2004
Research Assistant to Professor Anjum Nasim, LUMS, Summer 2001
Field Work, Implemented a socio-economic survey in southern Philippines, which collected information on about 1000 households and over 300 community organizations (collaboration between Economic Growth Center and the University of Philippines, Los Banos).  I managed a team of 7 group interviewers besides coordinating the overall project supervision.

American Economic Association

English (fluent), Urdu (fluent), Hindi (spoken, fair), Arabic (basic)

Professor Robert Evenson
Department of Economics
Yale University
PO Box 208269
New Haven, CT 06520-8269
Fax: (203) 432-3898
Email: robert.evenson@yale.edu

Professor Michael Boozer
Department of Economics
Yale University
PO Box 208269
New Haven, CT 06520-8269
Fax: (203) 432-3898
Email: michael.boozer@yale.edu

Professor Christopher Udry
Department of Economics
Yale University
PO Box 208269
New Haven, CT 06520-8269
Fax: (203) 432-3898
Email: udry@yale.edu

Information problems often limit market performance in less developed countries. It is well known that under these conditions, contracts and personal networks can facilitate market exchange. This dissertation examines various institutions, such as market pricing mechanisms and community organizations, in order to better grasp their role in economic development. In the first chapter, I examine the contractual forms in Pakistan’s agricultural markets and their impact on industry growth. In the final two chapters, we look at factors that determine the success of community groups in sustaining themselves over the long term and what that might mean for local economic outcomes.

The first chapter, Whither Quality? Incentives in the Sugarcane Market in Pakistan, examines the causes of low sugarcane quality in Pakistan, which has a fundamental impact on mill profits in an industry facing persistent losses. Even though it is the 7th largest sugarcane producer in the world, Pakistan ranks 28th among 34 cane-producing countries in terms of sugar yield. In spite of this, it is puzzling that mills do not provide incentives for quality in the existing market set up, choosing instead to focus their efforts to lobby for greater control, or at least supervision, over a farmer’s planting decisions.

It is often claimed that mills in Pakistan apply arbitrary premium/deduction to cane prices (nominally set on the basis of weight) at the time of purchase with a view to encourage better quality product. First, we look at prices in the market to determine if there are indeed any returns to cane farmers from an investment in quality. Using detailed survey data on household production and sales, we find no returns to the use of quality-enhancing inputs. This result employs mill fixed effects and is robust to alternative specifications.

Second, we find that few households (less than 13%) switch from one mill to another over a three-year period despite the presence of substantial mill effects in payments. This suggests that switching mills is not as costless to the farmers as is often stated. The result implies that sugar mills still enjoy a virtual monopsony over their suppliers, which is in contrast to the belief in policy circles that low quality arises from ‘excessive’ competition over cane supply which in turn inhibits investment by the mills in research and extension due to a potential for hold-up.

These results indicate that the sugar mills need to provide clear incentives to individual farmers for investment in quality. I argue that, short of such direct incentives, the industry will continue to suffer. Thus, any policy reform of this industry should encourage mills to invest in the latest technology which allows reliable measurement of sugarcane quality, and hence, design contracts that induce farmers to optimally choose quality.

In the second chapter, Community Organizations: Do they have a (Sustainable) Role in Sustainable Development? I look at voluntary community organizations in a sample of 55 villages in the Philippines and outline the factors that determine their relative longevity. An increasingly dominant paradigm in development emphasizes the importance of the private sector for determining the outcomes of development intervention. Indeed, international aid agencies now routinely insist on involving, or creating, local civic organizations to assist in identification, implementation as well as eventual ownership of development projects.

The idea behind such bottom-up, demand-driven approaches to development intervention appears two-fold: better long term outcomes as well as local capacity building. Although there is abundant, albeit questionable, evidence on the first point, there is little consideration in the empirical literature of the conditions under which a community organization might continue to serve its objectives over a long term. This begs the question whether outside involvement in catalyzing civic participation can ever produce long-term sustainable outcomes for a community.

Philippines has a long history of civic participation in voluntary groups with the result that its barrios today present an interesting opportunity to study a rich mosaic of groups formed with different aims and objectives. Based on data collected from the leaders of both active and de-funct community groups (that used to function in our sample villages post-1990), I estimate hazard models to predict the rate of failure of these voluntary groups. I show that, controlling for community heterogeneity, groups that have regular elections and better educated leaders tend to survive longer as well-functioning organizations. These findings have some relevance for what kind of design and leadership attributes may be desirable in a group to make a sustainable impact on a community.

The third chapter of my dissertation explores whether community organizations might help reduce transactions costs. The idea goes back to Theodore Schultz (1953), who hypothesized that villages located farther away from town centers are likely to face higher transaction costs caused by a lack of information and market opportunities.  Under these circumstances, it is expected that a family enterprise will have an advantage over traditional arm's length exchange.  In fact, the social capital literature posits a role for norms and social networks in the personalized exchange that often takes place in these situations. 

Transactions costs are generally quite hard to measure. I use a measure developed by Evenson, Kimhi and DeSilva (2000), in which they employ frontier production function estimates for agricultural households in Philippines to impute an estimate of technical inefficiency attributable to transaction costs. This measure is then compared with a social capital index for the same set of villages to see if the two are correlated. The latter index was constructed from the latest round of Bicol Survey using data generated from a modified World Bank instrument, which included questions about norms, civic participation and communal trust environment.