Essays on macroeconomics and development

Abstract

Land Rights and risk sharing in rural West Africa: Despite arduous efforts of advancing land rights in Africa, most of the continent experiences low levels of formally recognized property. I propose a novel contextualisation of formal land titling that motivates a theoretical model to account for land reforms’ effects when implemented in weak institutional environments with high risk. Village communities have developed informal mechanisms of risk-sharing to provide households with a safety net, while land allocation is centrally decided by traditional leaders. Therefore, when a land reform, aiming at granting individual property rights, takes place, it operates in a highly antagonistic way to the established customary rules. I build a model of risk-sharing with limited commitment to explain the competing forces developed between statutory land reform and informal mutual insurance at the community level. The model shows that a land reform increases the share of surplus that a villager can extract from a risk-sharing contract among community members and decreases the size of the pie available to the community. Additionally, it shows a non-monotonic relation between land allocation and productivity revealing a trade-off between output efficiency and size of risk-sharing. Subsequently, I use data from Burkina Faso to validate the theoretical predictions. Mutual insurance and land security in rural Ghana: We study the impact of land rights’ formalization on functioning of informal insurance and land re-allocations in Ghana’s rural communities. First, we provide empirical evidence suggesting that communities holding more of formal land titles enjoy higher land security, as measured by number of disputes due to multiple claims over land. Second, we find that land reallocations are more intense in those places, leading to increases in agricultural productivity and level of average consumption. Third, we show that communities with higher formality of land rights enjoy improved risk-sharing against idiosyncratic shocks. Motivated by this evidence, we develop a dynamic model of land and risk sharing subject to limited commitment constraints, where the equilibrium degree of co-operation is determined by the degree of formal land rights chosen. We show that the model can rationalize our empirical findings and can serve as a useful quantitative laboratory. Most interestingly, we find that although positive in the data, the effects of increasing land rights may be highly non-linear as at some point they may lead to a complete unraveling of informal co-operation in rural economies. Contagion as a dealmaker? The effect of financial spillovers on regional lending programs: The recent European sovereign debt crisis highlighted the critical role of regional lending arrangements. For the first time, European mechanisms were called to design financing programmes for member countries in trouble. This paper analyses how the risk of contagion, an essential characteristic of interlinked economies, shapes borrowing conditions. We focus on the role of spillovers as a channel of bargaining power that a country might have when asking for financial support from regional lending institutions. We build and present a new database that records both the dates on which official meetings took place, relevant statements were released and the timing of the announcements regarding loan disbursements. This database allows us to assess the defining role that announcements of future actions have in mitigating spillover costs. In addition, we study the design of lending arrangements within a recursive contract between a lender and a sovereign country. When accounting for spillover costs, arising from the borrower to the creditor, we find that it is in the lender’s best interest to back-load consumption by giving more weight to future transfers in order to reduce contagion cost. Subsequently, we test and validate our theoretical predictions by assessing the effect of spillovers on loan disbursements to programme-countries and by juxtaposing lending conditions imposed by the IMF and the European mechanisms.