“Firm and Market Response to Saving Constraints: Evidence from the Kenyan Dairy Industry”

On Wednesday, October 18th, at 2.30pm, the NOVAFRICA Center welcomes Lorenzo Casaburi, from University of Zurich, to present his work.

Lorenzo Casaburi (University of Zurich)

Failures in saving markets can spill over into other markets: When producers are saving constrained, trustworthy buyers can offer infrequent delayed payments, a saving tool, and purchase at a lower price, thus departing from standard trade credit logic. This paper develops a model of this interlinkage and tests it in the context of the Kenyan dairy industry. Multiple data sources, experiments, and a calibration exercise support the microfoundations and predictions of the model concerning: i) producers’ demand for infrequent payments; ii) heterogeneity across buyers in the ability to supply infrequent payments; iii) a segmented market equilibrium where buyers compete by providing either liquidity or saving services to producers; iv) low supply response to price increases. We provide additional evidence from other settings, including labor markets, and discuss policy implications concerning contract enforcement, financial access, and market structure.

Please find further information about this seminar here.