Institutions, Non-Farm Business and Accumulation in Kipatimu Village, South East Tanzania

407 Pages·2011·2.26 MB·English

by  Rob Grant

Institutions, Non-Farm Business and Accumulation in
Kipatimu Village, South East Tanzania
Robert William Grant
Thesis submitted for the degree of Doctor of Philosophy
University of East Anglia
School of International Development
December 2009
© This copy of the thesis has been supplied on condition that anyone who
consults it is understood to recognise that its copyright rests with the author
and that no quotation from the thesis, nor any information derived therefrom,
may be published without the author's prior, written consent.
Abstract
In the wake of economic and political liberalisation in Tanzania, this thesis
seeks to understand market development in one of the poorest and little
studied rural areas of the country. Research questions concern the emergence
of market coordination and its relationship with other forms of social
organisation such as kinship and religion. The research approach applies
formal and interpretive analysis to interview, survey and observation data
gathered during a 12 month period. Primary academic emphasis is on
economic theories of market functioning and development, with a central role
for individual decision making. However, the study also attempts a degree of
interdisciplinary engagement with concerns such as culture and identity more
typical of sociological or anthropological approaches. Theoretically, institutions
are at the heart of the analysis, while concepts such as transaction cost and
contracts are also important.
The study finds that ‘non-market’ forms of social organisation support market
activity as well as placing constraints on entrepreneurs, identifying a range of
strategies adopted in response by such individuals. Implications for business
growth, employment and public policy are discussed. Evidence is also found on
the importance of non-agricultural activity and migration for the rural economy.
The main contributions of the thesis are: the empirical findings on a previously
unstudied area of Tanzania; an enriched economic conceptualisation of market
development that takes account of institutions and identity; a model of
agreements between individuals in the presence of institutions; and an
adaptation of the ‘analytic narrative’ approach to applied economic study in a
developing country.

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Major Sections of Thesis
Major Sections of Thesis ................................................................................. 3
Table of Contents ............................................................................................. 4
List of Tables .................................................................................................... 8
List of Figures ................................................................................................ 10
Acknowledgements ....................................................................................... 11
1 Introduction: Rigidity and Change in Rural Communities ..................... 12
2 Linking Market Development to Institutions ........................................... 42
3 Research Approach and Methodology .................................................. 128
4 Kipatimu Village: People, Property and Institutions ............................. 157
5 Business 1: Dealing with Distance and Delay ...................................... 226
6 Business 2: Dealing with Demands ....................................................... 281
7 Conclusions: Institutions, Non-Farm Business and Accumulation .... 330
Appendix 1 The Rural Private Sector ...................................................... 358
Appendix 2 Questionnaire for Main Household Survey ..................... 379
Appendix 3 Questions for Semi-Structured Interview ........................... 383
Appendix 4 Questions for Small Household Survey .............................. 387
Bibliography ................................................................................................. 388

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Table of Contents
Major Sections of Thesis ................................................................................. 3
Table of Contents ............................................................................................. 4
List of Tables .................................................................................................... 8
List of Figures ................................................................................................ 10
Acknowledgements ....................................................................................... 11
1 Introduction: Rigidity and Change in Rural Communities ..................... 12
1.1 Chapter Introduction .......................................................................... 12
1.1.1 Aims and Methods of the Study .................................................. 12
1.1.2 Chapter Overview ....................................................................... 12
1.2 Economic Decisions in Context ......................................................... 13
1.2.1 Choice and Accumulation in Rural Tanzania .............................. 13
1.2.2 From Community to Market ........................................................ 15
1.2.3 The Tanzanian Context .............................................................. 20
1.3 Research Questions and Approach ................................................... 29
1.3.1 Research Questions ................................................................... 29
1.3.2 Choice of Disciplinary Focus ...................................................... 29
1.3.3 Selection of Study Area .............................................................. 34
1.4 Structure of the Thesis ....................................................................... 38
1.4.1 Outline of Chapters 2 to 7 ........................................................... 38
2 Linking Market Development to Institutions ........................................... 42
2.1 Introduction ........................................................................................ 42
2.1.1 A Review of Literature and Discussion of Concepts ................... 42
2.1.2 Chapter Overview ....................................................................... 42
2.2 The Role of Markets in Economic Development ................................ 42
2.2.1 Market promise, market puzzles ................................................. 42
2.2.2 Organising Concepts for the Analysis of Market Development ... 45
2.3 Transaction Costs .............................................................................. 47
2.3.1 Coase, Williamson and the Boundaries of Market Coordination . 47
2.3.2 Information Costs and Measurement .......................................... 51
2.4 Property Rights .................................................................................. 55
2.4.1 Coase (again) and the Importance of Property Rights ................ 55
2.4.2 The Basis of Property Rights ...................................................... 57
2.4.3 Applied Studies on Property Rights ............................................ 62
2.5 Contracts ........................................................................................... 65
2.5.1 Forms of Agreement and their Role in Market Coordination ....... 65
2.5.2 Fafchamps and Contract Enforcement in a Developing Economy
70
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2.6 Institutions ......................................................................................... 78
2.6.1 Use of the Term ‘Institution’ in Applied Studies .......................... 78
2.6.2 Institutions Conceptualised ......................................................... 81
2.6.3 Institutional Change .................................................................... 91
2.6.4 Institutions, Strategy and Identity .............................................. 102
2.7 Norms, Trust and ‘Social Capital’..................................................... 105
2.7.1 Social Norms: Theory and Evidence ........................................ 105
2.7.2 Trust, Social Capital and Networks ........................................... 113
2.8 Chapter Conclusion ......................................................................... 126
2.8.1 Analytical Concepts from the Literature .................................... 126
3 Research Approach and Methodology .................................................. 128
3.1 Introduction ...................................................................................... 128
3.1.1 Research Approach and Data Collection Methods ................... 128
3.1.2 Chapter Overview ..................................................................... 128
3.2 Research Approach ......................................................................... 129
3.2.1 Questions, Theories and Data .................................................. 129
3.2.2 Instruments and Samples ......................................................... 135
3.2.3 Analytic Narrative ..................................................................... 139
3.2.4 Conduct and Interpretation ....................................................... 144
3.3 Methodology Details ........................................................................ 151
3.3.1 Household Surveys .................................................................. 151
3.3.2 Semi-Structured Interviews ...................................................... 154
3.3.3 Observation and Secondary Sources ....................................... 155
4 Kipatimu Village: People, Property and Institutions ............................. 157
4.1 Introduction ...................................................................................... 157
4.1.1 The Developing Market Environment ....................................... 157
4.1.2 Chapter Overview ..................................................................... 157
4.2 Kipatimu ........................................................................................... 158
4.2.1 Location and Infrastructure ....................................................... 158
4.2.2 History and Politics ................................................................... 162
4.3 People and Property ........................................................................ 167
4.3.1 Demographics .......................................................................... 167
4.3.2 Movable Property ..................................................................... 170
4.4 Institutions ....................................................................................... 177
4.4.1 Scope ....................................................................................... 177
4.4.2 Formal Institutions .................................................................... 178
4.4.3 Semi-Formal Institutions ........................................................... 204
4.4.4 Informal Institutions .................................................................. 213
4.4.5 People, Property and Institutions .............................................. 224
5 Business 1: Dealing with Distance and Delay ...................................... 226
5.1 Introduction ...................................................................................... 226
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5.1.1 Activities, Transactions and Coordination ................................. 226
5.1.2 Chapter Overview ..................................................................... 226
5.2 Principal Accumulation Activities in Kipatimu ................................... 227
5.2.1 Skilled Labour Businesses ....................................................... 227
5.2.2 Palm Wine Selling .................................................................... 229
5.2.3 Fish Trading ............................................................................. 232
5.2.4 Shop Keeping ........................................................................... 234
5.2.5 Coconut Trading ....................................................................... 238
5.2.6 Logging ..................................................................................... 239
5.2.7 Market Intermediation ............................................................... 240
5.2.8 Other Activities ......................................................................... 243
5.2.9 Coordination and Vulnerable Transactions ............................... 244
5.3 Transaction Viability in the Presence of Social Institutions: A Model
247
5.3.1 Presentation Of The Model ....................................................... 247
5.3.2 Discussion of the Model ........................................................... 252
5.4 How Vulnerable Transactions are Sustained in Kipatimu ................ 259
5.4.1 Agreement Types and Enforcement Methods .......................... 259
5.4.2 Enforcement when the Agent Acts First ................................... 261
5.4.3 Enforcement when the Principal Acts First ............................... 269
5.4.4 Enforcement with Hidden Action............................................... 276
5.4.5 Chapter Conclusion .................................................................. 280
6 Business 2: Dealing with Demands ....................................................... 281
6.1 Introduction ...................................................................................... 281
6.1.1 Institutions and Accumulation: the Downside ........................... 281
6.1.2 Chapter Overview ..................................................................... 282
6.2 Nature of Demands .......................................................................... 283
6.2.1 Kinship Claims .......................................................................... 283
6.2.2 Jealousy ................................................................................... 284
6.3 Effect of Demands ........................................................................... 285
6.3.1 Help Given ................................................................................ 285
6.3.2 Saving ...................................................................................... 287
6.3.3 Doing Business......................................................................... 289
6.4 Enforcement of Demands ................................................................ 290
6.4.1 Sanctions .................................................................................. 290
6.4.2 Help Received .......................................................................... 295
6.4.3 Witchcraft ................................................................................. 298
6.5 Dealing with Demands ..................................................................... 301
6.5.1 Modelling Strategies ................................................................. 301
6.5.2 Evidence on Strategies ............................................................. 305
6.5.3 Migration and Demands ........................................................... 313
6.5.4 Employment ............................................................................. 317
6.5.5 Anti-Witchcraft .......................................................................... 325
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6.5.6 Chapter Conclusion .................................................................. 328
7 Conclusions: Institutions, Non-Farm Business and Accumulation .... 330
7.1 Introduction ...................................................................................... 330
7.1.1 Summary and Findings ............................................................. 330
7.1.2 Chapter Overview ..................................................................... 331
7.2 Research Questions: Evidence and Conclusions ............................ 331
7.2.1 Change and Institutions ............................................................ 331
7.2.2 Market Coordination ................................................................. 335
7.2.3 Embedded Coordination ........................................................... 337
7.2.4 Individual and Social Asset Buffers .......................................... 340
7.2.5 Growth and Employment .......................................................... 341
7.2.6 Accumulation Strategies and Social Institutions ....................... 344
7.2.7 Formal Institutions and Market Coordination ............................ 346
7.3 General Conclusions ....................................................................... 348
7.3.1 Research Approach and Methodology ..................................... 348
7.3.2 Market Development Theory .................................................... 351
7.3.3 Policy Implications .................................................................... 354
7.3.4 Further Research ...................................................................... 356
Appendix 1 The Rural Private Sector ...................................................... 358
Appendix 3 Questions for Semi-Structured Interview ........................... 383
Appendix 4 Questions for Small Household Survey .............................. 387
Bibliography ................................................................................................. 388

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List of Tables
Table 1.1 Macroeconomic Indicators 1985-2004 ......................................... 23
Table 1.2 Changes in Rural and Urban Consumption 1990-2000 .............. 25
Table 3.1 Joint Implications of Research Questions and Analytical
Concepts for Data Needed .......................................................................... 130
Table 4.1 Population Level and Growth ..................................................... 168
Table 4.2 Ownership of Selected Goods and Livestock ........................... 171
Table 4.3 Value of Selected Household Movable Assets ......................... 174
Table 4.4 Value of Selected Household Movable Assets by Main Head of
Household Activity ...................................................................................... 175
Table 4.5 Some Institutional Rules of the State ....................................... 180
Table 4.6 Statements on State Rules: Content .......................................... 182
Table 4.7 Statements on State Rules: Conformity and Enforcement ...... 183
Table 4.8 Statements on Economics and Ideology ................................... 185
Table 4.9 Some Institutional Rules of the Mission .................................... 188
Table 4.10 Statements on Mission Rules: Content, Conformity and
Enforcement ................................................................................................. 190
Table 4.11 Adult Educational Attainment in Kipatimu and Tanzania:
Highest Level Reached ................................................................................ 194
Table 4.12 Adult Educational Attainment and Main Activity of Household
Head .............................................................................................................. 197
Table 4.13 Some Institutional Rules of Formal Education ....................... 198
Table 4.14 Statements on Education Rules: Content and Conformity .... 199
Table 4.15 Some Institutional Rules of Political Parties ........................... 201
Table 4.16 Statements on Political Party Rules: Content and Enforcement
....................................................................................................................... 202
Table 4.17 Religion: Data on Demographics and Resource Distribution 206
Table 4.18 Some Institutional Rules of Religion ....................................... 208
Table 4.19 Rules Of Religion: Observations and Statements on
Conformity .................................................................................................... 210
Table 4.20 Some Institutional Rules of Kinship ........................................ 215
Table 4.21 Rules of Kinship: Statements on Content and Conformity .... 218
Table 4.22 Sex: Data on Demographics and Resource Distribution ....... 220
Table 4.23 Some Institutional Rules of Gender ......................................... 221
Table 4.24 Rules of Gender: Statements on Content and Conformity .... 223
Table 5.1 Some Vulnerable Transactions .................................................. 245
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Table 5.2 Agreement Enforcement Methods for Different Transaction
Sequences .................................................................................................... 260
Table 5.3 Statements on Methods of Enforcement when Principal Acts
First ............................................................................................................... 272
Table 6.1 Main Source of Start-Up Capital for Businesses ...................... 287
Table 6.2 Statements on the Authority of Elders and Family Meetings .. 294
Table 6.3 Statements on Help from Informal Institutions After Misfortune
and in Old Age .............................................................................................. 296
Table 6.4 Beliefs about Witchcraft .............................................................. 300
Table 6.5 Gains to an Accumulating Individual from Greater Conformity
with Social Rules ......................................................................................... 303
Table 6.6 Characteristics of Kin and Non-Kin Employment ..................... 320
Table A1.1 Comparison of Rates of Investment and Return to Capital in
Europe and Africa ........................................................................................ 365
Table A1.2 Distribution of Tax Revenues in Tanzania 2004/5 .................. 372

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List of Figures
Figure 1.1 Location of Study Area: Kipatimu Village in Lindi Region,
Tanzania ......................................................................................................... 33
Figure 2.1 Prisoner’s Dilemma in Dixit’s Private Enforcement Model ....... 86
Figure 2.2 Simple Schelling Type Coordination Game with Two Players . 98
Figure 2.3 More Complex Coordination Game with Two Players .............. 98
Figure 2.4 ‘Institutional’ Coordination Game with Four Players ............... 99
Figure 4.1 Population Pyramids ................................................................. 169
Figure 4.2 Value of Selected Household Movable Assets ........................ 174
Figure 4.3 Value of Selected Household Movable Assets by Main Head of
Household Activity ...................................................................................... 176
Figure 4.4 Comparison of Educational Attainment in Kipatimu with
National Statistics ........................................................................................ 195
Figure 4.5 Household Head Educational Attainment and Per Capita
Household Wealth ........................................................................................ 196
Figure 5.1 Pure Sequential BRAN Model of Transactions in the Presence
of Institutions ............................................................................................... 253
Figure 5.2 Simultaneous BRAN Model of Transactions in the Presence of
Institutions.................................................................................................... 258
Figure 5.3 Bar Owners Purchasing Palm Wine from Suppliers ............... 263

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