Institutional Economic Analysis Research Articles

Development of small businesses producing cereals, legumes, and sunflower seeds in wartime conditions

Small businesses producing cereals, legumes, and sunflower seeds contribute to the country’s food security and environmental protection potential. The purpose of this study was to substantiate the social, economic, and conceptual foundations of small business entities’ activities in the production of cereals, legumes, and sunflower seeds in modern conditions. The methodological framework of the study included the provisions of institutional economic theory and functional analysis. To generalise the results, the study employed analysis, graphic, and abstract-logical methods, and approaches of generalisation of results. The motivational orientation of the functioning of small businesses engaged in the production of cereals, legumes, and sunflower seeds and their place in production and consumption were determined. The study found that in 2023, the company achieved a record grain yield of 51.8 100 kg/ha, which was driven by favourable weather conditions. It was substantiated that the cost of crop production has increased due to lower prices for agricultural products (maize by -41%; sunflower by -35%; wheat by -37%) and an almost twofold increase in the cost of plant protection products and fuel. It was proved that in 2017-2022, 91.79% of the variation in net profit is explained by the variation in the level of grain, legumes, and sunflower seeds sold by small businesses. It was found that the disruption of the sales system of small businesses producing cereals, legumes, and sunflower seeds, the low level of purchase prices and the considerable increase in prices for material and technical sources of survival and fertilisers due to the hostilities make production inefficient. The development of small businesses and family farming stays one of the priority areas of regional policy. The information and analytical material can be considered when creating regional programmes for the development of agrarian entrepreneurship.

Sanitation is political: understanding stakeholders’ incentives in funding sanitation for the Gaza Strip, Palestine

The Gaza Strip is dependent on external aid to deliver basic services, including water and sanitation. Such services are not sustainable due to the Israeli occupation and the limited financial and technical capacities of service providers and the state. This paper examines the incentives of stakeholders in delivering sanitation services in the Gaza Strip through a qualitative institutional economics analysis of literature supplemented with qualitative key informant interviews. External aid is crucial to deliver basic services in the Gaza Strip. However, this has created a dependency that undermines the sustainability of sanitation services. Donor agencies often prioritise capital expenditure on visible infrastructure, such as wastewater treatment, without addressing its long and short-term operational needs; hence the Gaza Strip’s needs are continually addressed as an emergency response. The Palestinian Authority and Hamas de facto governments lack sovereignty over the Gaza Strip and Palestine. Therefore, they also lack the capacity and incentives to create an enabling environment for delivering safely managed sanitation. This paper contributes to development policy literature, the politics of infrastructure and wider politics of settler colonialism and siege basic services such as water and sanitation.

Outsourcing in Agriculture in Kazakhstan: Current State and Prospects

The article deals with the problems of increasing the efficiency of enterprises of the agro-industrial complex, the feasibility and possibility of using the outsourcing model in the business organization, the advantages of increasing labor efficiency and forms of management using an outsourcing system for agro-industrial structures are studied. In the post-crisis period, the negative results and principles of agribusiness organization were considered as a new direction for ensuring the sustainable development of agriculture by revising the outsourcing service. At the same time, the problem of increasing the efficiency of the economy of the agro-industrial complex of Kazakhstan was formulated, and much attention was paid to the study of the regional direction and the introduction of outsourcing processes. The aim of the study is to analyze the organizational and economic essence of outsourcing and increase the efficiency of agricultural enterprises using this tool in rural business. When studying outsourcing relations in agricultural enterprises, such methods of research methodology as systemic and situational analysis were applied when introducing outsourcing the theory of the synergetic concept, comparative analysis and synthesis, methods of institutional economic analysis and generalization. The results of the study on the development of outsourcing activities are aimed at the use by small and medium-sized agricultural enterprises, market organizations in business restructuring, as well as management bodies of associations, unions, and support centers interested in providing real assistance to rural entrepreneurs.

Luigi Ludovico Pasinetti 12 September 1930–31 January 2023

AbstractThe life and work of Pasinetti is overviewed by the founding scholar of computable economics, who observed this Italian economist’s formative years at Cambridge University. Folding in tributes from three further scholars, the obituary identifies Pasinetti’s contribution to capital theory, his view of the macro foundations of microeconomics, his focus on production rather than exchange, and his separation of theoretical and institutional economic analysis.

UNSOLD HOUSES IN MALAYSIA: THE KEDAH EXPERIENCE

As Government planning and policy greatly influence the state of Malaysian housing industry, a proactive Government should always be mindful of its citizens’ needs for house ownership. However, meeting the Government’s housing targets requires full support from the private sector, because no Government in the world can provide housing to all of its citizens on its own. Therefore, collaboration between the Government and private sector is crucial, where both parties need to work together in order to maintain the housing industry on the right track. It is unfortunate that the issue of unsold residential properties has plagued Malaysia’s housing industry for a long time – a problem that has not seen any sign of decline from year to year. The unsold properties' problem is complicated by the issue of Bumiputera (Indigenous) lots - lots that can only be sold or leased to Bumiputeras, namely Malays, the Indigenous people, Sabahans and Sarawakians. The State of Kedah, located in the northern part of Malaysia, is not spared from facing this issue, where the number of unsold houses are high. This study analyses the issue of unsold residential properties on Bumiputera lots in the state of Kedah, with the aim of finding the best solution to the problem. In order to achieve the objective, this study employs institutional economics analysis that is based on formal institutions or formal written rules. In other words, the study is based on institutional perspectives whereby the underpinning approaches can be analysed from formal and informal rules. The Elite Group Interview technique was used for data collection in three districts namely Kuala Muda, Baling and Kulim. These districts were selected due to the high volume of unsold residential properties. Eight respondents who had more than 25 years of experience in the property industry participated in this study. The data collected was analysed based on four (4) themes, comprising laws, rent-to-own, reducing house prices, and taxes on vacant houses. Finally, since the data collected were qualitative data, the finding was explained descriptively. The finding showed that institutional perspectives can be applied in property research for identifying alternatives to overcome unsold residential properties in Kedah. It also reveals that the rent-to-own method was the agreed best solution for this issue. By adopting this method, the government can prevent the release of Bumiputera lots and maintain the quota for land ownership among indigenous people.

Establishment of an Organisational and Economic Mechanism for Integration and Cooperation in the Agricultural Sector: a Systemic Approach

The growth of production efficiency in the agricultural sector of the economy is based on the use of various factors – organisational, economic, labour, material, motivational, etc. Among them, organisational and economic ones are a priority, which can also include integration relations. The mechanism of action of organisational and economic foundations of integration relations in the context of a systematic approach is rather underinvestigated, which determined the topic of research. The purpose of the study is to substantiate the theoretical, methodological, and practical foundations of building an organisational and economic mechanism of integrated structures from the standpoint of a systematic approach. The methodological basis of the study was the provisions of institutional economic theory and system analysis. Monographic, normative, graphic, abstract and logical methods and approaches to generalising results are used. The economic essence of the organisational and economic mechanism of integrated structures in the agricultural sector of the economy is determined. The essence of integrated structures and integrative formations from the standpoint of consistency is substantiated. The concepts of “integrated structure” and “cooperative” have been clarified. The interdependence of dysfunctions is determined – an integrated structure and an agricultural cooperative. The study results can be taken into account in the development of programmes: determining priorities for the development of integration and cooperative structures, developing laws and regulations for the establishment and development of cooperation and integration in the agricultural sector of the economy.

The economic organization of decommissioning nuclear power plants – an institutional economic analysis with case studies in the US, UK, and Germany

Abstract. The process of decommissioning nuclear power plants (NPP) is a multidisciplinary task that involves technical, regulatory, financial, and organizational activities. In order to fully decommission and subsequently release a reactor from regulatory control, a multitude of tasks need to be realized, i.e., defueling the reactor core, storing spent nuclear fuel, decontamination work, deconstructing conventional buildings, etc. Decommissioning is thus an intricate good that includes the supply of a variety of services, which must be produced upstream or offered in parallel. This paper provides an economic analysis of different options of organizing (or: governing) the decommissioning process, so as to minimize the total costs for society, while of course respecting security standards set by the regulator. The costs of providing decommissioning result from the production and transaction costs. The former are largely determined by technical aspects and development of the decommissioning process, and the possibility of exploiting economies of scale and scope. Transaction costs, on the other hand, mainly result from coordination between the different tasks as well as the involved actors, often private and public actors with different target systems and equipped with different resources. Transaction cost economics (TCE) is used to identify coordination areas and applied to formulate propositions on how nuclear utilities, decommissioning service suppliers, and waste management companies can establish vertical coordination. Transactions in the decommissioning process take place in a regulated environment and are governed, at least partially, by some public actors. In general, market governance is often assumed to be the most efficient governance structure, but in this context, our hypothesis is that institutional constraints, uncertainty, and factor specificity may call for other governance forms (Williamson, 1985). First analyses of the actors and the potential of the decommissioning market suggest an only slowly evolving market with only a few specialized companies and their subsidiaries able to provide technologically demanding services (Seidel and Wealer, 2015; Volk et al., 2019), while small and medium companies are confronted with high barriers to entry into the market (EC, 2018). Nuclear countries have implemented quite different organizational models, varying from specific national decommissioning strategies implemented by a public agency to a relatively free choice of the strategy for plant operators (Wealer et al., 2019). In some countries, procurement laws have been put into place to create a competitive market. However, as the decommissioning market has evolved, challenges to the competitive ideal have arisen, i.e., market concentration and asymmetries of information. This oligopolistic structure combined with the increase in demand for decommissioning services gives rise to concerns regarding the functionality of the market. There are also key logistical issues that must be addressed, including supply chain bottlenecks and procurement strategies. A unified finding is that decommissioning is highly interlinked with nuclear waste management and is also the main source of uncertainty in terms of cost as well as the length of the decommissioning process, as the missing disposal solutions for high-level radioactive waste render it impossible to release the nuclear power plants from regulatory control.

Institutional economic partnership analysis of capture based fisheries for empowering the handline tuna fishermen of Ureng Village, Leihitu Sub-district, Indonesia.

A substantial amount of capital is needed in the development of of the fishing business. An attempt has been made by the local government to overcome this problem faced by handline tuna fisher of Ureng Village by providing the credit facility. The problem arises from limited access to small-scale fisher to obtain credit and high-interest rates. The presence of PT Ureng Nusatelu that established a partnership with fishermen from Leihitu Sub-district, in particular with tuna handline fisher from Ureng Village, is expected as a solution to empowering the fishermen. This study aimed to analyze the mechanism and the implementation of institutional partnership, identify the type and strategy of that institution, and assess the performance of the partnership developed in an attempt to empower the handline tuna fisher. This research is expected to contribute to the related fishery agency in developing and empowering handline tuna fisheries. The study lasted for four months from June to September 2019 at Ureng Village, the Sub-District Leihitu. Sampling was collected purposively where data obtained were analyzed with partnership concept analysis, partnership implementation analysis, and partnership performance analysis. The result shows that the partnership developed between PT Ureng Nusatelu with tuna handline fisher of Ureng Village has not been running well. This is mainly due to the socialization of the partnership concept that was not fully accepted by the fishermen and discontinuous monitoring of the program. Performance partnership between PT Ureng Nusatelu and tuna handline fisher measured based on the income was still low, while the transactional cost is very high. At the same time, the performance indicator valued by a partnership group was considered poor, and the participation and perception of partnership members were still low.

Information Exchange in Supply Chains: The Case of Agritech

We propose to analyze the supply chain not (just) as interconnected firms where products move from primary production, through processing, down to final consumer (user), but rather as collaborating firms that exchange information in order for each to function. This opens the analysis of supply chains up for institutional economic analysis and also allows one to acknowledge that information can be used strategically. Yet, information exchange can also be hampered because of a supply chain’s structure—we focus on this. The difficulty of exchanging information is particularly important when an industry and its supply chain newly emerges or is disrupted. In such circumstances the way in which information is presented and used is not institutionalized yet in a way that works for the parties involved. We show the relevance of this approach to understanding supply chains by referencing the agrifood supply chain as it is on the cusp of being disrupted by the extensive use of Information Technology.

Blockchain Networks as Constitutional and Competitive Polycentric Orders

Permissionless blockchains have been described as a novel institutional building block for voluntary economic exchange, with unique protocol features such as automated contract execution, high levels of network and process transparency, and uniquely distributed governance. We argue that conventional institutional economics analysis of blockchain networks is incomplete absent a more robust application of descriptive polycentric analysis. Though the distributed governance that permissionless blockchain protocols provide is novel, these networks nonetheless require ongoing coordination between stakeholders and are subject to competitive pressures much like other private organizations pursuing similar goals for a set of users who can choose among providers. We characterize change on blockchain networks as resulting from internal sources and external sources. These internal sources include constitutional (protocol) design and the related need for collective choice processes to update protocols. In addition to law and regulation, competitive pressure is itself a critical external source of governance. Predominantly through analysis of two leading cryptocurrency networks, Bitcoin and Ethereum, we illustrate how conceptualizing of blockchain as a polycentric enterprise enhances our predictive and descriptive understanding of these networks.

Políticas de Conservación de Manglar en el Golfo de Guayaquil

During the last decade, the Ecuadorian government has designed and implemented a set of policies to improve mangrove forests conditions and their ability to provide ecosystem services. The present work aims to identify and explain current policies related to mangrove conservation in the Gulf of Guayaquil, which is a coastal region hosting more than 70% of Ecuador´s mangroves. The main assumption underlying this effort is the notion that mangrove conservation might be critically linked to subjective measures; these measures would better the welfare for populations that live in this ecosystem and depend on it. Based on the evidence of recent studies an institutional economic analysis was conducted; this analysis used the Situation, Structure and Performance framework. Results support the original assumption. Challenges were also identified for the continuity of current policies and new urgent needs for future research.

The status of the concept of identity in economics

The subject of this special issue of the Forum for Social Economics is ‘Identity, Institutions, and Power.’ As an introduction and as background for how the papers in the issue address this complex subject, I briefly discuss the contested status of concept of identity in economics. Just as economics as a whole is contested in regard to its theories, goals, and methods, so is the interpretation of the concept of identity. I close with brief comments on how the papers employ the concept in connection with their analyses of economic institutions and power relationships.

Can dispersed wind power take off in China: A technical & institutional economics analysis

In recent years, China has successively issued relevant policies to support the development of distributed renewable energy sources such as dispersed wind power (DWP) and distributed photovoltaic (DPV). The capacity of DPV grows fast, but the progress of DWP deployment is limited. In this paper, the improved levelized cost of electricity (LCOE) model and the internal rate of return (IRR) are employed to evaluate the economics of DWP and DPV for case regions. We find that, under current market regime, the IRR of DWP in eastern and central regions is 8.81%–10.34% for the grid side, and which of DPV is 9.08%–12.8% for the user side. When the power market is restructured, the IRR of DWP for industrial and commercial user side increases to 12.73%–14.86%, higher than that the return of DPV. Policy implications on grid-connection, land expropriation, and financial support, planning and approval procedure are proposed to promote the development of DWP. Overall, this paper covers the research gap on the development of DWP in China with a technical/institutional economics perspective and a comparison with DPV. Furthermore, our efforts make a significant contribution to DWP policy by identifying the institutional factors that hinder the development of DWP.

The economic organization of nuclear power construction projects: Organizational models for production and financing

In order to limit the rise in global average temperature to 1.5 °C above pre-industrial levels, international organizations such as the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC) suggest an increasing role for new nuclear power plants. Their pathways entail a large number of new builds by 2050. Given the projected large-scale deployment of new nuclear reactors, it is therefore essential to analyse the existing organizational models. This paper provides an institutional economic analysis of the organizational models for the production and financing of new nuclear power plants. A particular focus is on private sector involvement and competition. In this regard, the paper looks at the division of tasks between state and private actors in financing and production, the governance structures of the companies involved, their market shares, and their degree of vertical integration. The rate of nuclear expansion proposed under the IEA and IPPC scenarios is higher than has ever been achieved in the history of the industry, which has been in decline and contracting since the 1980s. Since the turn of the century, the nuclear sector has been dominated by Russia, while traditional reactor vendors are continually on the brink of bankruptcy and have more or less abandoned reactor exports. Heavy forging capacity for reactor pressure vessels continues to constrain the supply chain, although some new production capacity has been added. Small modular reactors would not alleviate this situation. On the contrary, they would also rely on heavy forges in Russia and Asia. Government support is required for new nuclear power plants (NPPs), be it in liberalized markets or coordinated economies. In liberalized markets support can take the form of federal loans, or power purchase agreements. Countries with regulated markets and a state-owned nuclear industry such as China, Russia or India will probably continue to build NPPs. However, expansion is slowing down even in these countries, while the share of renewables is on the rise.

Comparative analysis of Mexico’s independent system operator with U.S. peers: Institutional assessment structures and performance metrics

Wholesale electricity market assessment frameworks from the US provide a useful perspective for Mexico’s new electricity market. First, an institutional economics analysis of strengths and weaknesses of Mexico’s ISO (CENACE) provides a foundation for market assessment. Then, assessment frameworks used by US regulators studied herein for wholesale market operators highlight a framework for minimum necessary characteristics of electricity market products for application in Mexico’s wholesale market. Such institutional frameworks could serve as future performance measures in CENACE, independent of the electricity policy model.

Resolving Conflict between Parties and Consequences for Foreign Direct Investment: The Repsol-YPF Case in Argentina

In 2012, the Argentine government expropriated 51% of the shares of Yacimientos Petrolíferos Fiscales S.A. (YPF) from the Spanish company Repsol S.A. The YPF was nationalized without prior compensation, violating Argentina’s own laws and, consequently, the institutional framework in force in the country. As a consequence, the country’s reputation deteriorated and, although there were several contacts with multinational enterprises to become YPF’s new partner, the investment climate was affected, making it really difficult to attract Foreign Direct Investment (FDI). In order to attract these investments after the expropriation, the Argentine government understands that it is necessary to settle the legal proceedings with Repsol. In order to avoid an imperfect judicial procedure of long duration and with high transaction costs, both parties reached a settlement agreement. This paper presents an institutional economic analysis of expropriation, contextualizing it within the Argentine institutional framework and studying the trajectory of the nationalization of YPF. In this way, it seeks to contextualize institutionally the Argentine government’s decision and the impact it has had on both the FDI and the credibility of the country’s institutional framework. It also analyzes how the resolution of the conflict occurs through an agreement between the parties that avoids the judicial process, given its high transaction costs.

The political economy of property rights in monarchical Iraq: the quest for land reform 1944–1958

AbstractThis article explores the challenges of redefining property rights for land, with application to monarchical Iraq from 1944 to 1958. We apply two processes in the analysis of economic institutions to study history: a puzzle-solving method at the micro level, with broader interest in the role of institutions in development and economic growth at the macro level. Thus, we explore the interaction between demanders and suppliers of land reform in the political market, focusing on the parliamentary influence of big landholders as an interest group. We conclude that despite increasing demand for land reform, politicians were able to supply quantitative change only, consisting of the allocation of newly arable land to landless cultivators, rather than the redistribution of existing assets or qualitative change. We analyse these findings in relation to our concern for the role of institutions in development. Our discussion uncovers key insights into Iraq's political economy and its institutions.

Transaction Cost in Irrigation Tank Management: An Institutional Economic Analysis

Irrigation tanks formed the lifeline of village economy. The Government of Karnataka amended its Irrigation Act in 1965 and Participatory Irrigation Management (PIM) was brought under the domain of Cooperative Act and Water Users Cooperatives were formed to managed and operate the tanks. The present study was undertaken to assess the transaction cost in irrigation tank management in central dry zone of Karnataka. Two tanks Bukkarayanakere (farmers managed) and Ayyanakere (Minor Irrigation Department managed) were considered for the study. The results revealed that, total transaction cost incurred was high in Minor Irrigation Department managed tank or defunct water users association (` 1,06,085 per year) than farmers managed tank or active water users association (` 61,480 per year). This is because of free riding problem that prevailed in the Minor Irrigation Department managed tank command. Educating the farmers regarding the benefits of collective action is necessary to reduce the transaction cost.

Banking, Money and Credit: A Systemic Perspective

AbstractContemporaneous banking theories appear to understand financial institutions as intermediaries, relegating bank money creation through money multiplication outside the core of banking activity. This article takes a different systemic perspective, pointing to the dynamic and collective features that generate a banking system within and across financial institutions. Classic features such as bank credit creation, as well as classic issues such as bank runs, are reconsidered under the notion of a ‘banking system’ requiring coordination over time and circumstances.Our conceptual framework develops a heuristic model of the basic mechanisms on which bank money creation lays upon. This model disentangles the link between functional and institutional dimensions of the money system, aiming to include minimal institutions in economic theory and economic analysis of money. These basic mechanisms include: monetary financial institutions (bank entities) issue claims which function as money; they facilitate payments across agents in the economy over time and space; they increase the money base through credit creation; they hold fractional reserves and lend to each other. Ongoing bank activity involves cash and non-cash (accrual) processes occurring within each bank entity and across them. Each bank keeps currency money in bank deposits on behalf of other agents. But the bank activity is further characterised by the capacity or privilege to use these deposits, although the latter remain available for payment and redemption at will and at par. Moreover, the bank can create deposit by granting a loan to, or buy a security from a borrower. This bank capacity or privilege involves money generation that enables the bank credit manufacturing process. In this way, all the banks become interdependent on the flow of payments that are performed across them, generating the ‘banking system’. Since each bank is structurally unbalanced due to money generation, inter-bank coordination is required to maintain the banking system in operation over time and circumstances. Both inter-bank clearing and credit arrangements provide this coordination at the inter-bank level, which is effectuated through central bank intervention, clearing houses and the money market.From this systemic perspective, ‘systemic risk’ and ‘macro-prudential’ management and regulation are new labels for recurrent concerns of systemic coordination. A careful combination of design and policy is therefore required to reach coordination in view to prevent or respond to local and systemic crises. Drawing upon this conceptual framework, this article develops institutional economic analysis and implications for shadow banking; systemic risk, interdependency and interconnectedness; the relationship between money and credit and the real economy; and the systemic consistency between functions and institutions in monetary regimes.

Farm Behaviour and Incentives for Animal Welfare: On Stimulating Interest in Cow Life Expectancy by Industry Attentiveness

This contribution deals primarily with a new concept derived from institutional eco­nomi­cs, to improve animal health (eventually welfare, depending on the use of synonyms and actually measu­red as cow life expectancy, i.e. in figures: number of lactations). Based on consumer willingness to pay, it investigates a potential collaboration between a dairy industry whose aim is to diversify products and some farmers whose intention is to request compensation for a change of practices. For fin­ding practical attributes for health, we have a focus on practices promoting numbers of lacta­tions, currently at a low level in conventional farming. We distinguish farm types by str­ategies ask­ing why most farms are primarily aiming at maximal efficiency (feeding concentrates for high milk yields and having no grazing). Vice versa: this has raised public concern because (with big herds, high milk yields and minimal lactations) farmers seem to stress ani­mal welfare. We assume WTP exists for an improvement in animal health (though diffuse so far). I.e. on the one hand as a symptom of crisis, successes for gestation are low (almost half compared to those of farms “caring” for animals). On the other hand better practice can be financed if targeted by WTP. Further assumptions are: even the industry may admit problems with animal health, and within consumers’ and citizens’ circles, there is an increasing awareness and that WTP (finance) may enable private solutions. WTP could be used for those farmers doing better on animal welfare; but so far, markets have failed. We are confronted with different strategic behaviour of farmers (by sectors) whose commencing points (as ob­servation and deliberation) must be a willingness to change practices. A starting point should be insight into beha­viour(al) change and willingness to increase animal health (gestation), yet based on compen­sation. Compensation can be used to get more farmers interested in animal health, but it must be differentiated according to actions for improvement. In an institutional economics analysis of animal welfare, we will work out a concept of optimal compensation, preferably achieving cooperation between a dairy industry and willing farmers to lodge payments received from consumers. It means working on participation of actors in product diversi­fica­tion (milk identified by different sources) and transfer of money to those farmers who are ac­tu­ally working for animal health concerns. The paper further addresses selection of far­ms which manage to achieve set health goals and assure confirmation of achievements in increa­sing health. The goal is to increase the number of lactations. By utilizing contracted numbers of lactations as the basis for modelling a qua­n­­titative criterion which adequately shall reflect aspects of working for animal health (such as feeding practices, grazing, better husbandry (space and straw), caring (stress recovery), etc., is worked out and animal welfare shall improve.