My research
I am an applied microeconomist and my research interests are in development economics, market structure and the application of microeconomic theory to policy and institutional design.
Publications and Papers Under Review:
- Additionality when REDD Contracts are Self-enforcing”. October, 2016. with Brian Roe and Brent Sohngen, Environmental and Resource Economics.
- “Relational Contracts and Product Quality: The Effect of Bargaining Power on Efficiency and Distribution”. 2016. Journal of Agricultural and Resource Economics, 41(3): 405-424.
- Incentive Contracts for Environmental Services and Their Potential in REDD” (with Lea Fortmann, Brent Sohngen and Brian Roe)
- The Role of Cooperation and Reciprocity in Structuring Carbon Sequestration Contracts in Developing Countries (with Brian Roe). 2012. American Journal of Agricultural Economics, vol. 94(2), pages 411-418
Paper
- The Role of Bargaining Power in Relational Contracts (Under Review)
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This paper studies the effect bargaining power has on self-enforcing contracts. Optimal contracts are characterized under two enforcement regimes. When a contractible payment exists, the contract structure depends on the parties’ bargaining power. As the agent’s bargaining power increases, her incentive payments decrease even though her total compensation increases. Thus, efficiency wage contracts are more likely to be observed than performance contracts in markets where agents have high bargaining power. Self-enforcement is sustainable for any distribution of bargaining power when contracts are partially enforceable. Yet self-enforcement limits the effective bargaining power the agent can exercise when contracts are too costly to enforce because as the agent’s bargaining power increases the principal’s short-term gains from reneging exceed the long-term gains from the relationship. The results provide insight into the economic consequences and limits of policies that attempt to redistribute bargaining power among parties that trade under self-enforcing contracts.
- Balancing Market Power in Agrarian Contracts: Consequences for Social Efficiency, Cooperation, and Distribution (Earlier working paper version)
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- Self-enforcing Contracts for Reducing Emissions From Deforestation and Forest Degradation (Under Review)
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Reduction of carbon emissions from deforestation and forest degradation (REDD) has been identified as a cost effective element of the post-Kyoto strategy to achieve long-term climate objectives. The success of REDD depends primarily on the design and implementation of a financial mechanism that provides land-holders in developing contracts sufficient incentives to participate in a REDD scheme. This paper proposes self-enforcing contracts (relational contracts) as a potential solution for the constraints in formal contract enforcement derived from the stylized facts of REDD implementation because relational contracting relies upon mutual private self-enforcement in a repeated transaction framework. The optimal REDD self-enforcing contract is characterized and the parameters for sustainable private enforcement are provided. The optimal payment scheme suggests that all payments should be made contingent on the carbon offsets delivered, i.e at the end of the contracting period. Thus, the optimal contract does not observe any ex ante payment. Private enforcement is more difficult to sustain the higher the cost of forest conservation is relative to the value of the carbon offsets from the contract. Necessary extensions to the relational contracting model are also discussed.
Working Papers:
- Does Contract Enforcement Limit the Distribution of Bargaining Power? An Experimental Study.
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Asymmetric bargaining power and constraints to third-party contract enforcement characterize agricultural contracting. These features usually produce low returns for the farmers which result in policy attempts to balance the bargaining power. But little is known about the economic effects of such policies. This paper reports the results of economic experiments designed to investigate the effect of the allocation of bargaining power on efficiency and the distribution of profits when third-party enforcement is partially or fully unavailable. We find that the availability of third-party contract enforcement limits the effect that a bargaining process could have on surplus distribution. When formal enforcement is absent, the option to negotiate does not affect informal incentives; in fact, contracts were self-enforced more frequently. However, the bargaining did not change the distribution of payoffs. In contrast, when third-party contract enforcement exists, the bargaining changes significantly the distribution of profits and sellers (i.e., farmers) were able to get higher profits and higher share of the surplus. The existence of formal contract enforcement reinforces the effect of bargaining on the distribution of surplus. These results provide insight for economic policy into the consequences of shifting bargaining power in market settings characterized by informal institutions.
Work in Progress:
- Cooperation and Reciprocity in Carbon Sequestration Contracts
- Self-Enforcing, Cost-Effective REDD+ Contracts in Ecuador
- Heterogeneity in Conservation Costs and Self-enforcing Contracts in Tanzania
Other Publications:
- El Comercio Internacional de Carne Bovina en Centro America. 2005. ILRI. Project Report Download
- Trade and Environment Issues. 2004. (with Sepulveda, S. and Rodriguez, A.). San Jose, Costa Rica. 109 p. Rural Development Technical Handbook No. 25 Download
- Territorios Rurales, Competitividad y Desarrollo. 2003. (with Chavarria, H.; Sepulveda S; Echeverri, R; 2003). San Jose, Costa Rica. 70 p. Cuaderno Tecnico No. 23
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- Territorios Rurales, politicas E Institucionalidad en America Latina. 2003. (Collaboration to Sepulveda, S; Rodrıguez, A; Echeverri, R). Seminario Internacional Territorio, desenvolvimento rural e democracia. Fortaleza, Brasil
- Sistemas de Gestion Medio Ambiental: Las Normas ISO 14000. 2002. (with Sepulveda S.). San Jose, Costa Rica. 20 p. Cuaderno Tecnico No. 21
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