Publications [#141381] of Marc Bellemare
Sanford Institute Working Papers
- Xiaoyong Zheng and Marc F. Bellemare. "Moral Hazard, Heterogeneous Agents, and Imperfect Supervision: A Structural Approach." (November, 2007).
(last updated on 2008/01/03)Abstract:
We analyze the contract data of an exporting firm that delegates its production to small rural producers using data from Madagascar. Using structural modeling techniques, we estimate a principal-agent model that incorporates moral hazard, heterogeneous agents, and imperfect supervision. Our approach allows us to recover the model's underlying parameters and to quantify the welfare effects of imperfect supervision. We find that supervision has a total welfare effect that's positive and equal to over 13 percent of the value of the principal's net revenue, and that the gains derived from supervision are equally shared between the principal and the agents. Based on our findings, we argue in favor of a scaling up of contract farming activities in Madagascar.
