Wageningen MSc Management, Economics & Consumer Studies · Netherlands · Wageningen University & Research
Original practice questions written to the published syllabus · not past papersWhy institutions and transaction costs matter for how agricultural resources are used, and how agrarian institutions such as tenancy work.
In the exams: agricultural economics PhD entrance and fellowship examinations (light)
How our questions for Wageningen MSc Management, Economics & Consumer Studies spread across the units of Institutional Economics. Difficulty: 2 easy, 6 medium, 14 hard.
| Transaction costs | 4 | |
| Collective action and the group approach | 4 | |
| Institutions and institutional economics | 3 | |
| Institutions and resource allocation | 3 | |
| Property rights | 3 | |
| Institutional change | 2 | |
| Tenancy and sharecropping | 2 | |
| Interlinked agrarian markets | 1 |
Choose an answer, then open the working. Each explanation says why the right answer is right and why the others are not.
A researcher studies why mango processors in one region buy fruit through annual contracts while those in another buy on spot markets, taking land law and caste norms as given. In Williamson's four-level scheme the research is located at
B. Level 3, governance, the play of the game through contracts and organisational form
The choice between spot purchase and contracting is a choice of governance structure — Level 3. Land law (Level 2) and caste norms (Level 1) are held fixed as constraints; Level 4 would concern marginal input and output decisions given the governance structure, not the choice of governance itself.
Further reading: Williamson 2000
In transaction cost economics, the most important dimension along which transactions differ is
B. asset specificity
Williamson identified asset specificity, uncertainty and frequency as the critical dimensions and treated asset specificity as the most important because it creates bilateral dependency. Price elasticity and market size are not among the three dimensions.
Further reading: Williamson 1985
According to Williamson's discriminating alignment hypothesis, as asset specificity rises from low to high the efficient governance structure moves
A. from market to hybrid to hierarchy
Markets have strong incentives and autonomous adaptation, best when assets are generic; hierarchies have strong coordinated adaptation, best when specificity creates bilateral dependency; hybrids fit in between (Williamson 1991).
Further reading: Williamson 1991
North and Weingast (1989) argued that England's Glorious Revolution of 1688 promoted growth chiefly because it
C. created credible commitment by the Crown not to expropriate, through Parliament's control of taxation and independent courts
North and Weingast emphasised credible commitment: constraints on the Crown lowered the risk of default and expropriation, which lowered the cost of public borrowing. Enclosure was a long earlier process; the Corn Laws were repealed in 1846; printing money to avoid borrowing is the opposite of their argument.
Further reading: North and Weingast 1989
Which of the following is one of Ostrom's design principles for long-enduring common-pool resource institutions?
D. Graduated sanctions for users who violate the rules
Ostrom's principles include clearly defined boundaries, rules congruent with local conditions, collective-choice arrangements, monitoring by people accountable to users, graduated sanctions, conflict-resolution mechanisms, recognition of the right to organise and nested enterprises. Uniform national rules contradict congruence; unlimited entry contradicts boundaries; monitoring must be accountable to users.
Further reading: Ostrom 1990
Besley (1995) found that stronger land rights were associated with more tree planting in parts of Ghana but cautioned about interpretation. Why?
C. Planting trees can itself strengthen land claims, so investment may cause rights rather than rights cause investment
In many customary systems planting trees helps establish a claim, so causation can run from investment to rights; Besley used instruments to address this. Tree planting is investment; Ghanaian land is largely under customary tenure, not entirely state-owned; theory predicts rights raise investment, not reduce it.
Further reading: Besley 1995
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