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Imperfect markets and labour motivation: a case study in Senegal

Marijke VERPOORTEN student laureate

°1977 Belgium
Licence in economics, Katholieke Universiteit Leuven, Belgium, 2000

Imperfecte markten en arbeidsmotivatie. Een casestudie in Senegal

Marijke Verpoorten investigated a project in Senegal, originally financed by a Flemish NGO called VECO (Vredeseilanden-Coopibo). The project is about an irrigation scheme, which was handed over to local control a few years ago. Several small dams and a pump provide water for 33 plots, of which one is operated as trial plot. About 28 families benefited from this project directly, and they are organised on a co-operative basis. A few other, interlinked projects have been started in the village, but the irrigation project is central to the livelihood of the village and for the co-operative, providing revenues to finance its other activities. The co-operative is in charge of the sale of the produce and provides inputs and services to the families involved. There are also rules governing the sharing of labour on the common land, for the distribution of the revenues etc. In the last few years, yields and revenues appear to have collapsed, while large differences in yields between plots have emerged, despite the fact that all plots are of equal size and of rougly comparable quality. The author investigated the reasons for this evolution and divergence. For this purpose, she designed and implemented a survey using structured interviews.
After the field work, a few hypotheses were retained. One was that the problems were related to access to the revelant inputs (e.g. labour and seeds) at the right time. Another was that the nature of the co-operative and the rules of operations had resulted in people not willing to provide enough labour to the co-operative land, compared to their own (non-irrigated) private plots. Marijke Verpoorten used theoretical models applied to the local context to characterize these hypotheses. She also tested the models using standard econometric and statistical techniques.
Her first conclusion was that the divergence in yields across plots was linked to problems with labour: some families could not supply sufficient labour to the plots at the crucial moments during the season. This was not caused by a lack of casual workers willing to work on these plots, but because they lacked the cash to pay for these workers, since this is several months before the harvest. Late payment for the harvest by the co-operative aggravated the problem. In principle, the solution is simple: let the co-operative provide credit to farmers well before the harvest.
Nevertheless, Marijke Verpoorten found that the problem is more fundamental. The co-operative has no cash reserves because it had to take on a bank loan to pay for regular repairs to the pump. The latter has broken down regularly with devastating consequences for yields. The situation is unlikely to get better. It appears, therefore, that the problem lies in non-appropriate technology: the pump requires expensive maintenance and repairs, and loans are needed to pay for them. The repayments have depleted the cash for advances.
Consequently, the overall conclusion is quite negative. Was an irrigation system with modern technology appropriate for the local context? Was this not too risky an investment? Did one underestimate these risks, resulting in limited sustainability? In any case, Marijke Verpoorten's research has shown that careful economic research, also on developing countries, can be invaluable for understanding and evaluating interventions.

Report by Prof. Dr. Stefan Dercon, Centre for the study of African economies, Jesus College, Oxford, UK