In Market Institutions in Sub-Saharan Africa, Marcel Fafchamps synthesizes the results of recent surveys of indigenous market institutions in twelve countries, including Benin, Ghana, Kenya, Madagascar, Malawi, and Zimbabwe, and presents findings about economics exchange in Africa that have implications both for future research and current policy. Employing empirical data as well as theoretical models that clarify the data, Fafchamps takes as his unifying principle the difficulties of contract enforcement. Arguing that in an unpredictable world contracts are not always likely to be respected, he shows that contract agreements in sub-Saharan Africa are affected by the absence of large hierarchies (both corporate and governmental) and as a result must depend to a greater degree than in more developed economies on social networks and personal trust. Fafchamps considers policy recommendations as they apply to countries in three different stages of development: countries with undeveloped market institutions, like Ghana; countries at an intermediate stage, like Kenya; and countries with developed market institutions, like Zimbabwe.
Market Institutions in Sub-Saharan Africa caps ten years of personal research by the author. Fafchamps, in collaboration with such institutions as the Africa Division of the World Bank and the International Food Policy Research Institute, participated in the surveys of manufacturing firms and agricultural traders that provide the empirical basis for the book. The result is a work that makes a significant contribution to research on the continuing economic stagnation of many countries in sub-Saharan Africa and is also largely accessible to researchers in other fields and policy professionals.
"In this book Marcel Fafchamps has done more than summarize the exciting economic research on firms and markets in Africa over the last decade. He has provided a framework for understanding African economies that will serve as the reference on Africa for the foreseeable future."
—Garth Frazer, University of Toronto
"This book is a wonderful contribution to our knowledge on the subject. The work is original and the scholarship sound."
—Avner Greif, Department of Economics, Stanford University
"Since the economics profession has started to lend genuine attention to institutional issues and developed analytical tools and concepts to do so, the need to inquire into the specific situation of Africa has become pressing. In this book Marcel Fafchamps faces this challenge with his usual rigor and acumen, focusing on key issues of contract enforcement, social networks, and ethnic discrimination."
—Jean-Philippe Platteau, Namur University, Belgium
"By placing enforcement at the center of his study of firms' market transactions, Marcel Fafchamps makes a convincing case for the relevance of economic analysis for developing countries. By providing evidence on when and why breaches of contracts occur, and on when and how creditors screen potential debtors, he not only tests some of his theory's predictions but stimulates further research on the use of incentives for the analysis of the developing world."
—Jean-Jacques Laffont, IDEI, University of Toulouse, and University of Southern California