Interlinked Agreements and Institutional Reform in the Cotton Sector of Burkina Faso by Jonathan Kaminski :: NEUDC 2007 Papers :: Northeast Universities Development Consortium Conference :: Center for International Development at Harvard University (CID)

Over the last five crop seasons, cotton production has tripled in Burkina Faso after the country began a sectoral reform. The first step of the reform consisted of setting up a new institutional design giving rights to farmers to create their own groups while the second step established a professional partnership (with a privatization process for the former parastatal cotton firm) where cotton unions gained significant bargaining power. This paper presents a theoretical framework to deal with the role of institutions in the performance of outgrower schemes applied to the Burkinabe cotton sector. The theoretical insights emphasize the link between credit’s group design and the production incentives for farmers with imperfect information on input use and labour effort. The impacts of institutional reform are discussed relative to the dynamics of production and the better repayment performance of credit groups. We argue that the institutional reform and the change of bargaining power in favor of producers have pushed farmers to increase their investment in cotton growing (effort, land,...) and to better service their credit. JEL Codes: D82, L14, 013, Q13