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Sources of political, financial and social capital in rural Colombia

Benson-Hernandez, Allison (2019) Sources of political, financial and social capital in rural Colombia. PhD thesis, London School of Economics and Political Science.

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This thesis analyses dynamics of political, financial and social capital in rural contexts. It studies development outcomes through the analysis of the interrelations between the three sectors (state, market and civil society) and the institutions governing each. It builds on a territorial view of development, focusing on subnational analysis, and employs a pluralistic methodological approach, through the use of mixed methods. In the first paper, I analyse the relation between political institutions and distributive politics, in particular, the use of land as political capital. I study the case of Colombia during a process of institutional reform (consolidated in the drafting of a new constitution), which I characterize as a shift towards more inclusive institutions. This is defined as a shift towards a broader distribution of power (across political parties, branches of government, levels of government and societal actors) and towards a stronger and more effective state. Relying on panel data for over 1.100 municipalities during a 55-year period, I find evidence of a political land cycle: land allocations are systematically higher in electoral years relative to non-electoral ones. I show that this cycle is dependent on the political institutions in place, becoming smaller after the shift towards more inclusive institutions. The results point towards this being explained by incentive and capacity effects leading to a re-composition of distributive politics strategies from the allocation of targeted private benefits (like land) towards the strategic allocation of public goods. In the second and third papers, I focus on financial capital, in particular, access to agricultural credit, and social capital, materialized in the form of Rural Producer Organizations (i.e. farmers’ cooperatives and associations). I use novel data from Colombia to estimate logit, fixed-effects and differences-in-differences models. I find that RPOs increase access to agricultural credit at both the individual and local (municipality) level. The existence of positive general equilibrium effects implies that rather than there being crowding-out of credit (from RPO members to non-members), RPOs lead to aggregate increases in access to credit, constituting a tool for local financial development. I also show that the effects are heterogeneous: being positive for small farmers (through public credit) and for big farmers (through private credit), but not significant for medium ones. This appears to be the result of contextual conditions binding the effect of RPOs. In this case, the effect is conditioned by the structural segmentation of the credit market across sources and farmer type. In the third paper, I rely on a mixed methods analysis to provide a more comprehensive picture of the relation between RPOs and access to credit. I analyse the demand and supply side mechanisms through which RPOs reduce credit constraints. The analysis is based on 60 semi-structured interviews to key informants (organized and non-organized farmers, credit analysts and policy experts) and on four case studies (four municipalities in Colombia). The cases were selected following a novel methodology combining nested analysis and stratified random sampling. I find that RPOs increase the supply of credit by increasing the likelihood of banks approving credit requests through signals of project and farmer quality that reduce problems of imperfect information. RPOs also increase the demand for credit, not only via investment demands for projects of increased profitability, but also as they reduce transaction costs (through the sharing of information) and constitute a safety net, reducing risk credit constraints.

Item Type: Thesis (PhD)
Additional Information: © 2019 Allison Benson-Hernandez
Library of Congress subject classification: F History United States, Canada, Latin America > F1201 Latin America (General)
H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
J Political Science > JA Political science (General)
Sets: Departments > International Development
Supervisor: Faguet, Jean-Paul and Tukiainen, Janne

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