Binding Constraints Research Articles

Cluster-based agricultural development: a comparison between China and Africa

Clusters for high-value crops are ubiquitous in China and in African countries. Drawing from three case studies (potato cluster in China, medicinal and aromatic cluster in Egypt, and dates cluster in Tunisia), this chapter discusses the major challenges facing cluster development and the roles of different agents (e.g. entrepreneurs, business associations, and local governments). Cluster development involves supply-side or demand-side bottlenecks along the way, which are beyond the capacity of individual enterprises. Whether a cluster can develop to the next stage depends crucially upon whether the bottlenecks can be resolved. Because the bottlenecks are context- and temporal-specific, it would be impossible for a planner or outsider donor to prescribe a one-size-fits-all intervention to overcome all the binding constraints. Instead, local elites, such as business leaders and local officials, can play a greater role in identifying the emerging bottlenecks and figuring out indigenous solutions. In China, because local governments have an embedded interest in promoting local economic development, they are keen to provide local public goods or initiate joint actions to address the successive binding constraints and facilitate cluster development. By comparison, the role of the local government is more muted in Africa, limiting the growth potentials of agricultural clusters.

Demand and supply constraints of credit in smallholder farming: Evidence from Ethiopia and Tanzania

Credit constraint is often considered as one of the key barriers to the adoption of modern agricultural technologies and low agricultural productivity in low- and middle-income countries. Past research and much of the policy discourse associate agricultural credit constraints with supply-side factors, such as limited access to credit sources or high costs of borrowing. However, demand-side factors, such as risk-aversion and financial illiteracy among borrowers could also affect credit-rationing of smallholder agricultural households. This study investigates the nature of credit constraints, factors affecting credit constraint status, and the effects of credit constraints on adoption and intensity of use of three modern agricultural technologies – small-scale irrigation, chemical fertilizer, and improved seeds. The paper also assesses whether credit constraints are gender-differentiated. Primary survey data were collected from sample farmers in Ethiopia and Tanzania, and Tobit and two-step hurdle econometric models were used to analyze these data. Results show that demand-side credit constraints are as important as supply-side factors in conditioning smallholders’ access to credit in both countries. We also find that credit is a binding constraint for the decision to adopt technologies and input use intensity in Tanzania but not statistically significant in Ethiopia. Results suggest that women are more likely to be credit constrained (from both the supply and demand sides) than men in both study countries. Based on these findings, we suggest that policies should focus on addressing both supply- and demand-side credit constraints to credit access, including through targeted interventions to reduce risk, such as crop insurance, and to strengthen the gender sensitivity of credit policies.

Accounting for Fixed Effects in Re-Fracturing Using Dynamic Multivariate Regression

The oil and gas (O&G) industry is now as focused on minimizing costs and maximizing efficiency just as much as maximizing production. Operators are looking for new and cost-effective ways to add profitable assets to their portfolio. One such way is to re-fracture existing wells. There is evidence that these wells can be very productive in the Bakken. However, because of factors such as depletion and aging wellbore material, re-fracturing wells can be a difficult process to implement successfully and often have binding constraints on surface treating pressure (STP). This study attempts to quantify the effects that completion parameters have on re-fracturing treatment implementation by constructing dynamic fixed effects (FE) multivariate regression models. These models are not generally used in O&G and are more commonly used in economics and policy analysis. However, given that both economics and O&G deal with large amounts of uncertainty for each individual person and well, respectively, these models provide a much simpler approach to handle the uncertainty. These models also attempt to account for stress shadow effects from subsequent stages on treatment. The FE model has the advantage of treating a compilation of well treatment data as panel data and differencing out any unobservable fixed parameters. To the authors’ knowledge, this is the first study using dynamic FE models to estimate temporal stress shadow effects from one stage to the next. These models may then be thought of as estimating the boundary effects from stress shadows, which will affect treatment implementation. The novelty lies in estimating these effects, while accounting for fixed within-well variation, using simpler models than those usually found in industry. We stress that the simplicity of these models is a feature, not a bug. This study found that previous stage average STP, acid volume pumped, and perforation standoff were all statistically significant predictors of average STP with a strong temporal dependence of average STP on subsequent stages after accounting for fixed wellbore and geologic parameters. The models in this study also predict a positive marginal effect from acid volume average STP, which may seem counterintuitive, but is also backed by a previous study.

International Investment Law and Discipline for the Indebted

Abstract The object of the article is to recover the institutional memory of the 1980s debt crisis, when the decolonized world experienced forms of tutelage at the hands of international financial institutions, so as to sketch out material and discursive continuities with investment law’s present. The paper asks whether damage awards in investment arbitration serve functions analogous to state indebtedness in the 1980s. As during the 1980–1989 debt crisis, states are expected to generate the conditions for investor confidence by, among other things, guaranteeing rights to property and to contract. State indebtedness, in both periods, places stress on government budgets and reduces the living standards of poor people, contributing to heightened inequality within and between states. The article begins with a social-theoretical discussion of how debt serves to curb the possibilities for political action. This is followed by a review of IMF borrowing practices in the 1980s and a discussion of the merits of comparison with contemporary investment law. The narrative frames arising during the 1980s debt crisis that continue to have resonance in the era of investment law are taken up in subsequent sections, focusing on the refrains of mismanagement, the missing development angle, shrunken policy space and irrelevance of ability to pay. The method is predominantly qualitative, although reference is made to relevant empirical work. In the course of the discussion, the Tethyan Copper v. Pakistan (2019) ruling is periodically revisited as a specimen of how tribunals arrive at damages assessments in investment arbitration. The upshot is that indebtedness in the contemporary world serves functions similar to that in the 1980s: principally to constrain policy capacity in a wide range of sectors. These binding constraints serve the interests of only a small set of actors, while those rendered most vulnerable by these constraints are relegated to the margins.

Resource Allocation in Bank Supervision: Trade‐Offs and Outcomes

ABSTRACTWe estimate a structural model of resource allocation on work hours of Federal Reserve bank supervisors to disentangle how supervisory technology, preferences, and resource constraints impact bank outcomes. We find a significant effect of supervision on bank risk and large technological scale economies with respect to bank size. Consistent with macroprudential objectives, revealed supervisory preferences disproportionately weight larger banks, especially post‐2008 when a resource reallocation to larger banks increased risk on average across all banks. Shadow cost estimates show tight resources around the financial crisis and counterfactuals indicate that binding constraints have large effects on the distribution of bank outcomes.

Robust Optimal Power Flow under Renewable Uncertainty with Pairwise Convex Hull and Non-Affine AGC Redispatch Strategy

To accommodate the intermittent and uncertain renewable energy resources (RESs) in the power system, a novel robust optimal power flow (ROPF) method under RES uncertainty is proposed in this paper. A novel convex set, the pairwise convex hull, is applied to characterize the RES uncertainty. Then, an adjustable ROPF model is built to integrate RESs, where non-affine re-dispatch constraints are designed to cope with the situation when the automatic generation control (AGC) units’ power outputs hit their lower or upper bound during the re-dispatch process. The resulting ROPF problem is then solved with an adversarial approach (constraint generation) in which the potential binding constraints are identified to speed up the calculation. By solving the proposed ROPF model, the base point can be obtained to not only serve the forecasted load, but also ensure a feasible solution for all realizations of RES outputs within the pre-defined uncertainty set. Numerical studies on the 39-bus and 500-bus systems show that the proposed pairwise convex hull can capture the complicated distribution of RES outputs and is computationally very efficient. The binding constraint identification scheme can further dramatically speed up the computation. In addition, the non-affine AGC power re-dispatch scheme can achieve a lower objective value, for example, the proposed non-affine AGC re-dispatch-based ROPF method saves 0.389% and 0.1665% of the total costs for the 39-bus and 500-bus systems.

Key binding constraints, structural reform, and growth potential of Azerbaijan via economic diversification: A computable general equilibrium policy impact analysis

Being highly dependent on the oil sector, Azerbaijan suffered from economic downturn due to sharp fall in oil prices in 2015. However, such dependence creates development challenges for her. Simulated impact of prioritized economic reform policies—using a computable general equilibrium model (AZEORANI)—shows that, under the business-as-usual case with oil prices at 2011 level, it is projected to grow by 2.0% a year to 2030. However, consistent policy reforms enable enhanced growth by another 1.1 percentage points annually due to productivity boost and increased exports from non-oil sectors, viz., tourism and agriculture. In particular, following strategic roadmap, we consider baseline and policy shocks—10% improvement in productive efficiency, investment boost by 5% in non-mineral sector, and enhanced agricultural efficiency by 5%, and boost in tourism and transport by 10% via logistics-infrastructure, and technical progress in manufacturing over long run by 10–20% per annum. All these show that economic reforms have potentials to induce positive impact to overcome the binding constraints inhibiting growth and hence could promote economic development of Azerbaijan.

The effects of “nonbinding” price floors

Governments often impose price floors to protect sellers against low prices in markets characterized by uncertainty. Hard floors arise in grain and currency markets whenever the government acquisitions at the support price are unconstrained. Soft floors arise whenever such acquisitions are subject to a binding constraint. An important special case of a soft floor arises in cap-and-trade programs when the permit auction has a reserve price. Such an auction is equivalent to one with no reserve price combined with a government program to acquire at the reserve price up to the amount auctioned. Using a unified approach, we investigate a novel characteristic of such floors. Although seemingly “nonbinding,” such floors can influence the new equilibrium price. Whether inserted below or above the laissez-faire price, they can result in a new price strictly exceeding the floor—a phenomenon we dub “action at a distance.” We explain it theoretically and illustrate with simulations.

A Simplified Finite Element Model for Modular Steel Structure Building Wallboard through Experimental Research and Finite Element Analysis

The traditional research on steel plate shear wall structure mainly focuses on the overall performance of the wall, and the mechanical properties of the connection between plates and plates and between plates and frames are not clear. In this paper, the experimental research on the wallboard structure of bending plate was carried out and the mechanical properties and failure modes of five walls were analyzed. In addition, the connection properties between plates and frames were studied by finite element analysis. A simplified finite element model is presented by experimental study and finite element analysis. The results show that the finite element analysis results are in good agreement with the experimental results. The finite element model with the two-point binding constraint between the end of the bending plate and the angle steel can well simulate the mechanical properties of the steel plate shear wall structure.

Accounting for Climate Change in Community-Based Natural Resource Management: Reflections on Wildlife Conservation in Namibia

Community-based natural resource management (CBNRM) has emerged as a key technique for resource governance across much of southern Africa. While it was seen early on in its inception in many countries as a virtual panacea for sustainable development, its success has waned over time. While the predominant literature points to a number of reasons for diminished benefits, I argue in this article that climate change is the binding constraint to programme success. I further argue that this has been largely omitted from scholarly research owing to CBNRM being analysed predominantly as a domestic policy for conservation, which ignores the global dynamic of this form of resource governance and the power imbalances created by the many players involved. I argue that CBNRM is best understood as a global assemblage in which competing actors exercise various forms of power that are at times synergistic and at other times in opposition to one another. The article specifically outlines the issue of trophy hunting as a form of ‘consumptive’ conservation, which is generally framed in contrast to photographic tourism, seen widely as a ‘non-consumptive’ form of conservation. Based on fieldwork conducted in Namibia, I argue that all forms of tourism are in fact consumptive and that all variables need to be accounted for in deciding what is consumptive or not consumptive.

A pandemic triad: HIV, COVID-19 and debt in low- and middle-income countries

This article assesses the impact of the HIV and COVID-19 pandemics and debt dynamics on health, HIV and pandemic preparedness and response-related financing in developing countries. Using a novel dataset, we did a cross-national systematic analysis of all data sources available for government expenditures on health, HIV, COVID-19 and debt servicing in selected developing countries. We found an inadequate multilateral response with the ensuing gaps allowing both pandemics to thrive. The G20 Debt Service Suspension Initiative and the Common Framework only covered countries with a third of the global population of people living with HIV. Rising and unsustainable debt levels are limiting the capacity of governments to protect the health of their populations. Government spending is already falling in response to high debt payments. Specifically, debt servicing is crowding out lifesaving investments. In 2020, for every USD 5 available, USD 4 was spent on debt servicing. Only USD 1 was invested in health. This is a binding constraint on countries’ efforts to control COVID-19. Even with a gargantuan effort to increase health expenditure, the outlook for health financing remains negative. Fiscal consolidation, with a heavy emphasis on expenditure cuts, is expected to take place across 139 countries in the coming years. These findings suggest that fiscal policymakers should be concerned about the crowding-out and constraining effects of public debt. To this end, pragmatic recommendations are made to treat and cancel debt as a critical policy lever to accelerate the end of the HIV and COVID-19 pandemics in developing countries as a key condition to addressing the growing inequalities and to ensure debt can be a benefit, not a burden.

The directional optimal transport

We introduce a constrained optimal transport problem where origins x can only be transported to destinations y≥x. Our statistical motivation is to describe the sharp upper bound for the variance of the treatment effect Y−X given marginals when the effect is monotone, or Y≥X. We thus focus on supermodular costs (or submodular rewards) and introduce a coupling P∗ that is optimal for all such costs and yields the sharp bound. This coupling admits manifold characterizations—geometric, order-theoretic, as optimal transport, through the cdf, and via the transport kernel—that explain its structure and imply useful bounds. When the first marginal is atomless, P∗ is concentrated on the graphs of two maps which can be described in terms of the marginals, the second map arising due to the binding constraint.

Financial Constraints, Tax Burdens, and Firm Growth: Evidence from Indonesia

Using a subjective measure of the constraints and data from World Bank Enterprise Survey, this paper investigates whether two business constraints, financial constraints and tax burdens, have the same impact on Indonesian firm growth. This paper employs instrumental variable estimation to handle endogeneity problems and finds that among the two business constraints examined in the analyses, only the financial constraint is a binding constraint that has a significantly negative impact on Indonesian firm growth, while taxes have a positive and significant impact on firm growth. Based on size classification, a significant impact is only found on large firms. Financial constraints and tax burdens are likely not to be binding constraints to firm growth for small firms, and the benefits from taxes are also not found on these firms. Further investigation of financial constraints reveals that private firms, manufacturing firms, and young firms are more sensitive to the negative impact of financial constraints.

Biological, material and socio-cultural constraints to effective menstrual hygiene management among secondary school students in Tanzania.

Menstrual hygiene management is an important determinant for girls' educational outcomes. We develop a method of cross-sectional analysis that quantifies the relative importance of four distinct mechanisms: material, biological, social and informational constraints and consider four main schooling outcomes: absenteeism, early departure, concentration and participation. We use survey data from 524 female students enrolled in four co-educational secondary schools in Northern Tanzania. Average age at first period is 14.2 years (standard deviation = 1.1, range 9-19). Information is the least binding constraint: 90-95% of girls report they received information about menstruation and how to manage it. In contrast, biological constraints are hindering: (i) the distribution of menstrual cramps and pain is bifurcated: most girls report very light or very strong pain (rather than moderate) with considerable educational impacts for girls in the latter group, (ii) irregular cycles (62%) and difficulty predicting the cycle (60%) lead to stress and uncertainty. Socio-cultural constraints are binding as 84% would feel shame if male peers knew their menstrual status, and 58% fear being teased over periods. Material constraints include prohibitive costs: girls spending between 12-70% of the daily national poverty line (6,247 TSH per day) on pads during their period. However, we discern no statistically significant relationship between access to pads and absenteeism. In contrast, biological and socio-cultural constraints as well as lack of sanitary infrastructure have significant effects on absenteeism. The results have several implications. First, sanitary pad interventions should consider participation and concentration as main outcomes, in addition to absenteeism. Second, biological (menstrual cramps and pain) and socio-cultural (fear, stigma) constraints are drivers of menstruation-related absenteeism and participation in the classroom and need to be evaluated in trials. We suggest exploring analgesic use, alternative pain-management techniques, menstrual cycle tracking technologies, and social programming in future trials.

Does the structure of credit markets affect agricultural development in West African countries?

Growing evidence suggests that credit constraint or the inability of rural farmers to access financial instruments remains a binding constraint to enhanced productivity in sub-Saharan Africa. We complement this evidence by exploring the contribution of credits to agricultural development with a particular emphasis on the structure of the credit market, captured by agricultural credits, credit to households and firms engaged in agricultural production, and domestic credit to the private sector. Employing advanced panel data estimation techniques to account for endogeneity and cross-sectional dependence in a panel of West African countries, we find evidence supporting the supply leading and demand following hypotheses. We argue that targeted policy reforms that increase agricultural credits and credit to firms engaged in agricultural activities might be more effective in increasing agricultural productivity.

Determinants of Migration: Cotton Strikes and Income Shocks in Mali

How do transitory income shocks affect household migration decisions in low-income countries? We study how income losses from a cotton strike affecting Malian districts differentially changed agricultural household migration choices. The short duration and geographic specificity of the strike allows us to cleanly identify the long-run impact of a sudden change in household income on migration choices. We show that a drop in income precipitated by the strike reduced household migration rates by approximately 32% over a six-year period. A randomized inference placebo test corroborates the validity of our result. We demonstrate that not having cash on hand is a binding constraint to labor migration for poor populations.

On the Problem of Planning of Multi-Product Flows and Modernization of the Transportation Network

Introduction. The problems of optimal planning of multi-product flows on transportation networks have a variety of important practical applications (transportation, logistics, communication networks). The mathematical models of these problems, as a rule, are characterized by a large dimension (hundreds of thousands of variables). Due to the specific features of multi-product transportation problems (pronounced block structure), the use of standard general-purpose optimization packages for their solution is not advisable. In this work of an applied nature, we propose a method for solving one class of such problems, taking into account their specificity. The method is based on the decomposition scheme with respect to a set of binding constraints. The corresponding dual problem is the nonsmooth optimization problem. To solve it, a new version of the subgradient algorithm with space dilation of variables is used. This approach to solving block optimization problems has been tested in solving a wide class of applied problems and, as experience shows, is characterized by a fairly high efficiency. Purpose of the article to develop a solution method and software for the problem of optimal planning of multi-product flows and modernization of the transportation system. Results. A mathematical model of the problem of optimal planning multi-product flows on the transportation network is proposed. The model is based on a variant transportation realization scheme. The software is developed in the C++ language in the style of object-oriented programming. The following algorithms are used as basic elements of the software: an algorithm for finding the shortest paths on a graph, an algorithm for solving a transportation problem on a graph, nonsmooth optimization algorithm. Conclusions. The output data of the developed software determines the following information: rational transportation scheme, critical by capacity sections of the transportation network, recommendations for the rational distribution of funds for the reconstruction of the transportation network. The software is designed to solve the problems of long-term planning of the functioning and development of the transportation system. Keywords: optimal planning, mathematical model, subgradient methods, dual problem, software.

Managing Marine Mammals and Fisheries: A Calibrated Programming Model for the Seal-Fishery Interaction in Sweden

This paper develops a model based on the concept of Positive Mathematical Programming (PMP) that is useful for ex-ante analyses of how policy measures affect commercial fisheries. PMP models are frequently used in agriculture, but rarely for analyzing fisheries. Fisheries often face a large set of constraints such as effort regulations and catch quotas of which some might be binding and others not. An econometric approach is developed for calibrating models with both binding and non-binding constraints. The interaction between seals and Swedish fisheries is used as an empirical application. Seal interaction is modeled as seals predating fish from passive gear (nets and hooks), which is primarily an issue for the coastal fishery. The model contains 24 fleet segments involved in 247 different fishing activities in 2012. The results show that if no further management action is taken, fisheries using passive gear will reduce their activities from about 46 000 days at sea per year to about 41 000 and reducing their economic performance from losses of about 2 million Euros to about 3.3 million. The impact from seals can be reduced by reducing the seal population or providing economic compensation.

Agricultural Growth Diagnostics: Identifying the Binding Constraints and Policy Remedies for Bihar, India

Agriculture plays a significant role in economic development of underdeveloped regions. Multiple factors influence the performance of agricultural sector but a few of these have a strong bearing on its growth. This study develops a growth diagnostics framework for agricultural sector in Bihar, located in eastern India, to identify the most binding constraints. The study results show that poor functioning of agricultural markets and low-level of crop diversification are the important reasons for low agricultural growth in Bihar. Rise in price instability of agricultural produces indicates a weak price transmission across the markets even after repealing the Agricultural Produce Market Committee Act. Poor market linkages and non-functioning producer collectives at village-level affect the farmers’ motivation for undertaking crop diversification. Hence, policy suggestions to overcome these binding constraints include the state provisioning of basic market infrastructure to attract private investment in agricultural marketing, strengthening the Farmer Producer Organisations, and framing a comprehensive policy on crop diversification.

Site-specific agronomic information and technology adoption: A field experiment from Ethiopia

Smallholder farmers in Africa typically only have access to blanket fertilizer recommendations which are defined over very broad areas and may not be optimal for local production conditions. The response to such recommendations has generally been poor. Using a randomized control trial in Ethiopia, we explore whether targeted extension advice leads farmers to align fertilizer usage to the recommended levels and whether this impacts productivity. We also consider whether coupling the targeted information with agricultural insurance encourages fertilizer investment. Results show that targeted recommendations closed the gap between the amount of fertilizer used and the recommended amounts and this in turn increased productivity and profits. We found no differential effect of the targeted recommendation when coupled with agricultural insurance, suggesting that the risk of crop failure is not a binding constraint to fertilizer adoption in this context, or that farmers do not consider agricultural insurance a useful risk-mitigating mechanism.