Empirical Tests of Impacts of Rationing: The Case of Poland in Transition, February 2000

This study tests the theory of rationing, examining changes in household consumption behavior during the transition to a market economy in Poland, 1987–92. A model of consumption under rationing is developed and fitted to prereform quarterly data from the Polish Household Budget Survey. Virtual prices, prices at which consumers would have voluntarily chosen the rationed levels of goods, are derived for food and housing. The prereform Almost Ideal Demand System (AIDS) model with rationing is estimated. Estimates from the virtual AIDS yield plausible values for price and income elasticities. The AIDS model (without rationing) is also fitted to postreform quarterly household survey data for comparison and evaluation. When the two sets of results are compared, the impacts of rationing are consistent with the theory. Own-price elasticities for nonrationed goods are larger after the reform, and there is increased complementarity and decreased substitutability for the nonrationed goods. The results for Poland show a 75 percent decline in real household welfare over the transition and this welfare loss is one-third the value obtained using reported prices.

Cooperatives and Contracting in Agriculture: The Case of West Liberty Foods, October 2005

The West Liberty Foods turkey cooperative was formed in 1996 to purchase the assets and assume operations of Louis Rich Foods (an investor-owned processing rm), which, at the time, announced the imminent shutdown of its West Liberty, Iowa, processing facility. We study the creation and performance of this �new generation� cooperative using eld interviews with grower members and company management. We describe changes, before and after the buyout, in the contractual apparatus used for procuring live turkeys, and in the communication requirements, work expectations, and nancial positions of growers. During the private ownership period, most of the inputs (except labor and facilities) were provided by the rm; there was substantial supervision of the growers' actions; growers faced little price and production risk; and growers' equity was due largely to ownership of land and other farm assets. Our interviews reveal that, after cooperative formation, growers were exposed to considerable additional risk; monitoring of growers by the rm was less intensive; grower time and effort commitments to turkey production increased substantially; and a signicant fraction of rm (cooperative) equity came from growers' willingness to leverage their farm and personal assets (and hence indirectly their existing relationships with local lenders). We argue that some of these changes are consistent with a nancial contract where asset pledging and its corollary risk generate higher work effort by growers and a reduction in agency rents. These economies likely compensate for an organizational deadweight loss traditionally associated with cooperative governance.