Smallholder Identities and Social Networks: The Challenge of Improving Productivity and Welfare A very preliminary draft Christopher B. Barrett July 2003 AAEA annual meetings Montreal

Poverty necessarily reflects relatively low productivity per capita, so work on improving productivity, especially in agriculture. The empirical puzzle that motivates this paper: Many recent studies find salutary effects of various measures of social embeddedness at micro level. But at macro level there seems a significant negative relation. Can we reconcile these two observations? This paper (i) offers a more general analytical framework that nests within it issues of identity and social networks, then (ii) illustrates the usefulness of the framework with a few, brief, qualitative examples. Very much an early work in progress!

A General Analytical Approach Build on Akerlof and Kranton (2000), acknowledging the intrinsic value of identity, and making individual identity and resulting social networks endogenous, with frictions created by identity-dependent behavioral expectations. Nests the instrumental effects found in the literature on social capital. What is identity? Collective identity and social networks

A Behavioral Model Max V(A j0,I j0,K j0,N j0 ) ≡ U(e j0,c -j0,r j0,s j0 ) + δV(A j1,I j1,K j1,N j1 ) (1) c j0,e j0 Objective function captures intrinsic valuation of one’s psychological and social status as well as interpersonal externalities due to altruism, positional externalities, or both. s j0 = s(I j0,c j0 ) (2) r j0 = r(N j0,c j0 ) (3) e j0 ≤ P(I j0,N j0 )[L(c j0,K j0 ) + A j0 ] + B(I j0,N j0 ) - F(c j0 ) (4) whereF(c j0 ) = 0 for L(I j0 ) ≤ c j0 ≤ H(I j0 ) (5) = Φ(c j0,I j0,N j0 ) > 0 otherwise

Laws of motion: A j1 = a(A j0,e j0,c j0,c -j0 )(6) N j1 = f(N j0, I j1, c j0, c -j0 ) (7) I j1 = f(I j0, r j0, c j0, c -j0 ) (8) K j1 = k(K j0,I j0,I -j0,r j0, c j0, c -j0 ) (9)

Some Implications of the Model (i)Productivity and expenditures are increasing in one’s density of social networks and for those possessing particular identities due to -Higher net payoffs -Faster learning -Better access to informal finance (ii) Social networks and identity confer intrinsic benefits as well as instrumental value. People routinely make tradeoffs between the two. (iii)Identity-dependent behavioral expectations constrain choice. Separating equilibria based on identity. Finance problematic.

Some Implications of the Model (continued) (iv) Movement to a higher productivity equilibrium often depends on coordinated action among a critical mass of members within a community. - homophily and strong link networks: power to coordinate, but also power to subjugate/exploit (v) Egalitarian pressures that can impede investment by creating very high de facto marginal tax rates

Four Sample Puzzles Foregoing significant productivity gains (a) Conformity, tradition and rice intensification in Madagascar - Ceremonial expenses: famadihana, zebu sacrifice - Green revolution methods: Taboos and work restrictions - SRI: Ancestral tradition and social conformity * identity and strong social networks impediments (b) Striga control in Kenyan maize systems - non-host trap crops (A. histrix) * lack of strong social networks an impediment

Four Sample Puzzles (continued) Strategies to facilitate gains (c) Boarding schools for poor children - not just school quality differences: remaking identity (d) Farmer field schools - aim to stimulate farmer experimentation and to build their confidence: identity transformation and creation of common knowledge.

Conclusions: Research Implications (i)Intrinsic value of identities and social networks? (ii)Importance of coordination failures or conformity effects as adoption barriers/ (iii)do behavioral expectations constrain individual activity and investment choice? (iv)dynamic effects of current behaviors on endogenous identity/networks Serious identification problems: significant role for qualitative research

Conclusions: Policy Implications Opportunity for policy due to (i) Coordination failures and multiple equilibria (ii) Externalities Tipping points may be influenced/overcome by - traditional instruments (subsidies, finance, etc.) - targeting: indicator/community in spite of leakage? Question enthusiasm for creating groups if one does not shape identity (FFS model) Beware overemphasis on material well-being

Thank you for your time, patience and comments!