Journal Article

A Dynamic Option Value for Institutional Change: Marketable Property Rights in the Sahel

Frederic J. Zimmerman and Michael R. Carter

in American Journal of Agricultural Economics

Published on behalf of Agricultural and Applied Economics Association

Volume 81, issue 2, pages 467-478
Published in print May 1999 | ISSN: 0002-9092
Published online May 1999 | e-ISSN: 1467-8276 | DOI: http://dx.doi.org/10.2307/1244595
A Dynamic Option Value for Institutional Change: Marketable Property Rights in the Sahel

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In this article we use dynamic programming methods to create an option value measure of the value of the institutional innovation of marketable property rights. This measure has two properties that are important to understanding institutional change: it is truly dynamic and it allows for agent heterogeneity. In the case of West Africa, we find that the collapse of customary risk management institutions is a vital part of the demand for marketability rights as agents struggle to smooth income and consumption in its wake. We find that the social efficiency implications of this demand for institutional innovation are ambiguous.

Keywords: heterogeneity; institutional innovation; land markets; O130; Q150

Journal Article.  0 words. 

Subjects: Agricultural Economics ; Economic Development

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