Institutional Economics: Theory of Institutional Change
Addressing the complex issues of understanding reality, one cannot ignore that the issues are multidisciplinary. This study employs institutional economic approach in addressing the question of youth integration into smallholding farming, given that it permits the study to combine economical and sociological discipline. Family farming can be either considered as institution or organization. The institutional change theory is, hence, relevant family farming embedded in social institution. This section, I am going to show that given family farming can be considered as an institution and an organization, the institutional change based on ―the shared mental model‖ is relevant in explaining the question of why smallholder farmer quitted their farm.
Concept of Institution
Self-interested behavior embedded in human mind and ignorance, which individuals face when they interact; generate the potential inter-individual conflicts and social interaction issues. Inventing social rules and following the social rules are, hence, the devise for restricting self-interest of all or some member of the society and to better mutual advantage in exchange process (Mantzavinos, 2001). Therefore, enforcements are the characteristic of the institution.
Motivations derive from self-interest seeking (economic aspect) arise social problem and inter-individual conflict. Social rules and institutions exist as the mean of solving social problem and overcoming the social conflict (Mantzavinos, 2001).
Due to the limits of human cognitive capacity plus the complexity of the environment (social aspect), individuals mobilize their energy only when the new problems arise. They, then, classify the new problems into situation where it is similar to the old existing one that they used to solve. Then it follows the routine.
Institutions exist as rule of the game to stabilize expectation and to reduce uncertainty of agents (Mantzavinos, 2001). Institutions are, therefore, defined as social rules i.e. rules of the game that shape human interaction in the society through mechanism of social control either formal or informal (North, 1990). They are patterns of behavior serving to solve the problem of cooperation and providing the platform for conflict resolution (Mantzavinos, 2001).
Institution is generally referred to every kind of organization. It is necessary to distinguish between institution as rules of the game and organization (or institution) as corporate entity, for example, the bank (Ellis, 1988; Mantzavinos, 2001; North, 1990). Organization as corporate entity is a group of individual so-called collective units characterized by a set of procedural rules that define the coordination of individual members to achieve the common objective or to solve a common problem. When organizations deal with other organizations or with individuals, they are submitted to the general social rules which are equally constrained by general rules of the game. That social rule is called “the institutions” (Mantzavinos, 2001, pp. 83-84).
Mantzavinos (2001) distinguishes formal and informal institutions based on its enforcement agency. Formal institution is enforced by law. Informal institution can be classified into three categories: (1) conventions as self-policing institutions, (2) moral rules with individual as the first party controller and (3) social norms which are enforced by the member of the social group.
Institutional Change theory
Depending on the social-cultural context, individuals have different mental models and capacities to process information. They therefore act differently when making their choice in the economics of exchange (North, 1995; Williamson, 2000).
Because of the economic interest, people will try to maximize its own benefit which is not necessary to add value to the economies at all such as rent seeking, free riding. This could lead to tragedy of the common (Chang, 2010). The act in seeking such personal interest with guile is called “opportunism” (Williamson, 1985, p. 30). Normally, people intended to rationally economization orientation. But since they have limited capacity to make their choice due to the limited “cognitive competence”, the situation of behavioral uncertainty arisen. Williamson (1985) calls this “bounded rationality”. Based on this “behavioral uncertainty”, Williamson views the emergence of institution as a contractual relation. Contractual relation is never perfectly defined; contractual gap is, hence, occurred. Parties involve the relation, devise machinery to “work thing out” that is to invest their specific assets (asset specificity) in order to specialize in the governance structure. Objective is to minimize the transaction cost9 as well as to safeguard the behavioral uncertainty; finally, alternative mode of organization is defined. This is known as organizational theory.
Williamson„s organizational theory is oriented towards industrial firms especially related to the aspect of organization management and contractual interrelation between organization that is it evolves mainly at the institutional design and formal rule (Chavance, 2009, p. 79). In this case, transaction cost framework is often applied in which production cost, governance cost and alternative mode organization are the theme of analysis (Williamson, 1985, pp. 43-63). In addition, according to the four level of institutional analysis, Williamson (2000, p. 597) distinguishes between the institutional environment and institutional arrangements which correspond to informal and formal rules. Since it takes very long time to change informal rules, it would be difficult to conduct a field study at this level. Hence, Williamson tends to analyze the institutional only formal rules. However, Slangen, Loucks, & Slangen (2008, p. 84) observe that there have been many types of cultural shifts during the last one hundred years suggesting that institutional change at this level is not that time dependent. In this regard, it is probably a limitation of Williamson organizational theory if the informal rule is taken into account. Instead, I will consider North‟s theory of institutional change.
Due to socio-cultural factors, people are influenced by the system of belief, ideology and other aspects of behavior such as a form of altruism and self-imposed standard of conduct. This will influence their choices (North, 1990, pp. 20-25). Institutions are, hence, defined as the rule of game in a society where human impose constraint to structure/shape the human interaction that create the incentive systems10 for human exchange in either politic, social or economics. It is about rules and norms both formal and informal with their enforcement characteristics in the society. If institution is rules of the game, organizations are, then, players in within society that can be individual or group who share common purpose to achieve objectives such as political body (political parties, senate, …), economic bodies (firms, trade unions, family farms, cooperatives), social bodies (churches, pagoda, clubs, civil society …) and educational bodies (school, university, research center …) (North, 1990, 1995, 2003).
The institutional change is determined by the interaction between institution and organization. Two main determinants shape institutional change. First is the opportunity provided by the incentive structure of the institutions. Second is the feedback process that humans perceive and react to the changes in the opportunity set. Organizations are created in line with the institutional framework and will act to get the opportunity set from the incentive structure of the institutional framework. The chance to gain the profitability depends on the mental model in which entrepreneur of organization process the information. The cognitive capacity of entrepreneur creates a kind of communication among member of the organization so that every member possesses the same understanding-a shared mental model. This is known as organization learning. Therefore, organizations will invest on seeking means that permit them to be able to capture more opportunities i.e. knowledge11. When the organization evolves in taking advantage of the opportunities set, they will become more and more specialized in knowledge, more efficient and more productive, more competitive and gradually change the institutional framework (North, 1990, 1995, 2003).
Institutional change as process of problem solving
In line with North„s ideas concerning individual perception, motivation, knowledge and learning process, Mantzavinos (2001) elaborates the theory of shared mental model as a simple communication model and, thereby, explains institutional change as a process of collective problem solving which individuals face. The main argument for this theory is that institutional change is the outcome of changing agents‟ perceptions if their interests are better served under the new institutional arrangements. The change will go through the evolutionary process of learning (growth and transmit knowledge) i.e. trial and error by either collective or individual. Once, everyone possesses the same cognitive structure (shared mental model), they, then, initiate the change deliberately through collective action or spontaneously through invisible hand.
When individuals meet a problem, they try to find ready-made solutions from the environment they are living in. If new problems occur, individuals communicate. The effect of communication (called insertion rule) permits introducing solutions to the problem into the cognitive system of individual from the cognitive system of other individuals. Finally, both sender and receiver possess the same cognitive rule(s) and finally arise the share rule(s) between individuals called a “shared mental model”(Denzau & North, 1994; Mantzavinos, 2001, pp. 68-69). Base on this problem-solving model, the institutions are, then, either changed deliberately or spontaneously. Deliberate change happens when collectives encounter the same problem and make a conscious choice to solve it. Spontaneous change happens when individuals try out an innovative12 solution. If a given new solution solves the problem, other individuals tend to react, to imitate and to adopt the new solution. The process, with aid of invisible hand, constitutes the accumulative process through which new behavior or pattern of action becomes more wildly adopted by those who expect to have better condition.
In this study I apply the problem-solving model (motivation and knowledge as learning process) deriving from the theory of institutional change to understand conditions for integration young into smallholding agriculture. Based on this model, individual and family make choices based on the problems they face in their livelihood, knowledge of solutions they have learnt from member of their social group, and what they perceive to be the best solution conditioned by their resource constraints.
Family farm: as institution or organization
It is important to highlight meaning of family farm13 or farm household. The term „family‟ implies a range of sociological factors, such as interpersonal relationships, whereas „household‟ implies notions of functional economic activity (Tipper, 2010).
Families are households and include kin, which refers to a blood-relationship between individuals. Once notions of kinship are attached to family, it implies collective responsibility, collective action rules, norms and decision making within family members (Tipper, 2010). In this sense family may be considered as an „institution or informal institution‟(Chia, Dugué, & Sakho-Jimbira, 2006; Mantzavinos, 2001).“Family” can be considered as „organization‟ in the sense that it comprises governance structures for coordination of economic activities to achieve common objectives, i.e. sustaining livelihood (Requier-Desjardins, 1994). It is a unit of production involving both production and consumption. One of its important roles is as provider of insurance against economic adverse events (Pollak, 1985). In this case family may incline to the notion of household suggested by Tipper (2010) and organizational theory suggested by Williamson (Williamson, 1985).
Existing theories explaining the change of family farming
Lewis as early as in 1954 stated that all countries at some stage have to experience the movement of a labor force from the agricultural sector to non-agricultural sectors especially in societies with a fairly low level of economic development and rapid population growth. This is because agricultural activities are subject to diminishing returns. When there is surplus labor adding to the same plot of land, then labor productivity will decline up to the point where it is equal to or below the subsistence level. Commercial farmers must reduce the number of workers or reduce the wage rate. Family farm households must share the earning from agriculture to more member of household working on the farm and the dependent. When this share is below the household subsistent, farm household„s member will seek alternatives which could result in higher earning such as out-migration. More often, this migration has implied geographical movement of workers from rural to urban areas. The growth of urban unemployment would drive this labor working in petty services which has usually low productivity (Thirlwall, 2006).
In line with Lewis regarding to population growth, Dynson, (2010) argues that population growth is the main factor for societal change. Considering mortality and fertility as natural phenomena, demographical transition theory explains the path of transition as the change of society from the high birth and death rate to lower birth and death rate and, thereby, resulting population growth, people movement from rural to urban (urbanization) and change from “young age structure” to “old age structure” society (Dyson, 2010). Theory stated that traditional society will begin with declining in mortality which leads to rapid population growth: urbanization, migration, gender differentiation i.e. changes in women‟s roles, child bearing, family structure; these pose the stresses and strains on the society. As a consequence, people reduce number of children implying the decline of fertility. The society will gradually move to the structure of population aging14 (Dyson, 2010, pp. 216-225). However, even though each country has to go through the process of transition, it does not mean that each country would achieve the same outcome of the transition. The concept of demographical transition shares similar perspective with institutional economics. On the pathway of institutional change, the outcome would vary even though the same policy and standard institution was adopted. To understand the current challenge of the world, North (2003) suggests taking into account-population growth and institutional structure. Hence, land and labor of family are important aspects for addressing youth issue in family farming.
General social and economic theories of migration are always popular when issues involve people‟s decisions to migrate out of the farm. The theories emphasize numerous factors influent decision of agent of the family farm. General social theory of migration suggested that those factors are (1) original factors (push and pull forces), (2) destination factors, (3) intervening obstacles (physical and sociocultural distance) and (4) personal factors (perception in which individual learn from their environment) (Rhoda, 1983). The economic migration theory focus on (5) the expected “profitability of the employment” at the destination; that is, a personal cost-benefit analysis taking place in the prospective migrant‟s mind and extended to income and intersectional linkage model (Rhoda, 1983; Todaro, 1969).
Sustainable livelihood theory suggests that migration has now become a central feature of the livelihood of the majority of households in low income countries (Ellis & Freeman, 2005). Illustration 1 shows the linkage between migration and the livelihood framework15 as a way of moving out of poverty. The immediate connection migration to the human and financial capital in livelihood framework could help family farming to accumulate their wealth. Migration involves mobility of labor together with a person‟s experience, skills, educational level and health status. This human capital will play multiple roles in both reducing vulnerability and enabling asset accumulation of the household. Earnings obtained from migrating and the remittances sent back by migrants to their resident families are to maintain or raise the level of other assets such as saving, land, equipment, livestock, education of children and so on. This could contribute to the increase of household asset and reduction of the rural poverty (Ellis & Freeman, 2005).
Table of contents :
CHAPTER 1 IS FAMILY FARMING AN OPTION FOR FUTURE YOUTH EMPLOYMENT IN CAMBODIA?
1.1 Problem of the study
1.2 Farmer exclusion and job creation
1.3 Smallholder farming: structural constraints
1.4 Cambodia: demographic, employment and agrarian-nexus
1.5 Research questions
1.6 Youth definition applied in the study
1.7 Structure of dissertation
CHAPTER 2 THEORETICAL BACKGROUND, RESEARCH FRAMEWORK, AND METHODOLOGY
PART I. Theoretical background
2.1 Institutional Economics: Theory of Institutional Change
2.1.1 Concept of Institution
2.1.2 Institutional Change theory
2.2 Institutional change as process of problem solving
2.3 Family farm: as institution or organization
PART II. Theoretical framework
2.4 Existing theories explaining the change of family farming
2.5 Framework for successful and sustainable youth integration in farming
2.6 Framework for understanding the issue of integration youth in smallholding farming in this PhD study
PART III. Methodology
2.7 Research Design
2.7.1 The study area for the first survey
220.127.116.11 Site selection in Otdar Meanchey
18.104.22.168 Why three districts?
22.214.171.124 Site selection in Takeo province: why two districts?
126.96.36.199.1 Tram Kak commune
188.8.131.52.2 Prey Kabas commune
184.108.40.206 Social economic survey sample
220.127.116.11 Focus group discussion with youth
2.7.2 The case study on Young Agricultural Entrepreneur Project (YAE)
2.8 Economic calculation and data analysis
2.9 Some Ethical Considerations
2.9.1 Youth perception on farming
2.9.2 Economics data from YAE case study
2.9.3 Year of getting marriage
2.9.4 Typology of farm hosueholds
2.10 Analytical Framework
CHAPTER 3 UNDERSTANDING RURAL LIVELIHOOD AND SMALLHOLDING FARMING IN CAMBODIA
3.1 Historical setting of Otdar Meanchey and Takeo province
3.2 Socioeconomic diagnostics of rural households
18.104.22.168 Youth education
22.214.171.124 Children education (age below 14)
126.96.36.199 Household head‟s education
188.8.131.52 Youths currently studying
3.2.3 Migration and youth
3.2.4 Consumption and household expenditure
3.2.5 Income sources
3.2.6 Food security
3.2.7 Access to credit
3.2.8 Settlement in Otdar Meanchey and Takeo
3.2.9 Concluding remark
3.3 Non-farm activities
3.3.1 A short history of non-farm activities in Cambodia
3.3.2 The nature of non-farm activities in the three study areas
184.108.40.206 Five main categories of non-farm activities
220.127.116.11 Agricultural wage labour
18.104.22.168 Salaried employment
22.214.171.124 Labor-based work
126.96.36.199 Income-based category of non-farm activities
3.3.3 Migration and non-farm farm income
188.8.131.52 Education of migrant
184.108.40.206 Migration as a temporal activity
220.127.116.11 Non-farm and migration income per person
18.104.22.168 Reason for migration and the use of remittance
3.3.4 View on non-farm activities
3.3.5 Concluding remarks
3.4 Description of agricultural activities
3.4.1 Biophysical environment in Otdar Meanchey and Takeo province
3.4.2 Rain-fed rice farming in Otdar Meanchey province
22.214.171.124 Rice cultivation
126.96.36.199 Annual crops
188.8.131.52 Regrouping annual crops and vegetables in Otdar Meanchey
184.108.40.206 Animal production
220.127.116.11 Common resource (CR)
18.104.22.168 Fruit Tree
22.214.171.124 Economic comparison of agricultural activities in Otdar Meanchey
3.4.3 Diversified rice farming system in Tram Kak
126.96.36.199 Rice cultivation
188.8.131.52 Annual crops
184.108.40.206 Regrouping Annual Crops and Vegetables in Tram Kak
220.127.116.11 Animal production
18.104.22.168 Common Resource in Tram Kak
22.214.171.124 Fruit Trees in Tram Kak
126.96.36.199 Economic comparison of agricultural activities in Tram Kak
3.4.4 Prey Kabas irrigated rice farming system
188.8.131.52 Intensified rice cropping in Prey Kabas
184.108.40.206.1 2R and 3R rice cropping
220.127.116.11.2 DR: water receding rice
18.104.22.168.3 HR: Late cycle rice or late season rice
22.214.171.124.4 Factors affecting the choice of 2R, 3R and HR
126.96.36.199 Annual crops in Prey Kabas
188.8.131.52 Vegetables in Prey Kabas
184.108.40.206 Regrouping Annual Crops and Vegetables
220.127.116.11 Animal production
18.104.22.168 Common Resources in Prey Kabas (CR)
22.214.171.124 Fruit Trees in Prey Kabas
126.96.36.199 Economic comparison of agricultural activities in Prey Kabas
3.4.5 Concluding remarks
3.5 Land Value Index
3.6 Minimum Surface for Sustainable Integration in Family Farming (MSI)
3.6.1 Calculating poverty line/minimum need per person per day or per year in USD
3.6.2 Defining the Minimum Surface for Integration in Farming
3.6.3 Land situation for possible youth integration
3.7 Diversity of household: A typology of farm households
3.7.1 Principle component analysis and cluster analysis
3.7.2 Farm type in Zone Tram Kak
188.8.131.52 Tram Kak PCA result and cluster analyses
184.108.40.206 Description of farm the typology in Tram Kak
220.127.116.11 Economic performance and livelihood strategy of each farm type in Tram Kak
18.104.22.168 Economic sustainability of farm type in Tram Kak
22.214.171.124 Farm capacity in comparison to poverty line in Tram Kak
3.7.3 Farm type in Prey Kabas
126.96.36.199 Prey Kabas PCA result and cluster analyses
188.8.131.52 Description of farm the typology in Prey Kabas
184.108.40.206 Economic performance and livelihood strategy of farm type in Prey Kabas
220.127.116.11 Economic sustainability of farm type in Prey Kabas
18.104.22.168 Farm capacity in comparison to the poverty line in Prey Kabas
3.7.4 Farm type in Zone Otdar Meanchey
22.214.171.124 Otdar Meanchey PCA result and cluster analyses
126.96.36.199 Description of farm typology in Otdar Meanchey
188.8.131.52 Economic performance and livelihood strategy of each farm type in Otdar Meanchey
184.108.40.206 Economic sustainability of farm type in Otdar Meanchey
220.127.116.11 Farm capacity in comparison to poverty line in Otdar Meanchey
3.7.5 Concluding remarks
3.8.1 Socioeconomic conditions: farming have to accommodate more youth
3.8.2 Difficulty in looking for non-farm jobs link to low level of education
3.8.3 The degradation of farm economies and rural poverty: Farming as a safety net
3.8.4 Role of migration as a supplementary income to farming
CHAPTER 4: YOUTH INTEGRATION IN FAMILY FARMING IN CAMBODIA
4.1 Re-defining of youth in farming
4.1.1 Youth household
4.1.2 Adult household
4.2 Description of youth and adult household
4.2.1 Distribution of youth and adult household in each zone and type
4.2.2 Youth and adult household: land shared at marriage and current land
4.2.3 Economics characterization of youth and adult household
18.104.22.168 Tram Kak youth and adult
22.214.171.124 Prey Kabas youth and adult
126.96.36.199 Otdar Meanchey youth and adult
4.3 Analysis youth integration capacity
4.3.1 Defining youth integration capacity
4.3.2 Youth integration capacity in each zone by farm type
188.8.131.52 Capacity youth integration in Tram Kak
184.108.40.206 Capacity youth integration in Prey Kabas
220.127.116.11 Capacity youth integration in Otdar Meanchey
4.3.3 Economic capacity of youth integration in each farm type
18.104.22.168 Zone Tram Kak
22.214.171.124 Zone Prey Kabas
126.96.36.199 Zone Otdar Meanchey
4.4 Household strategy for future youth
4.4.1 Investment in children education
4.4.2 Integration into farming under the MSI
4.4.3 Integration under the form of generation transfer
4.4.4 Migration to zone pioneer to seek for agricultural land
4.4.5 Farm trajectory Tram Kak, Prey Kabas and Otdar Meanchey
4.5.1 Factor of enable and unable
4.5.2 Land amortization of land/sub division of land
4.5.3 Land is main challenge for future youth integration
4.5.4 Small holder farming is safety-net
4.5.5 Sustainable integration in farming need a complementary from non-farm
CHAPTER 5: INSTITUTIONAL DIMENSION FOR SUSTAINABLE YOUTH INTEGRATION IN CAMBODIAN FAMILY FARMING
5.2 Perception on farming
5.2.1 Theory explaining perception
5.2.2 Single youth perception and aspiration toward farming
5.2.3 Family perception on agriculture
188.8.131.52 General opinion on agriculture
184.108.40.206 Is it easy to start farm work?
220.127.116.11 It is not easy to get land clear in zone pioneer like Otdar Meanchey
18.104.22.168 Traditional knowledge is no longer applicable when rice is more intensified256
22.214.171.124 Experience determines the view on the easiness of starting up farm work
126.96.36.199 Do you think agriculture is a good option for employment?
188.8.131.52 Do you intend to hand over your farm to children?
5.3 Institutional dimension in support youth integration in farming
5.3.1 Role of existing CBOs in the survey
5.3.2 NGOs Intervention: Case study of CEDAC‟s YAE program
184.108.40.206 Very few attempts to test youth integration program in farming
220.127.116.11 CEDAC and young agricultural entrepreneur program
18.104.22.168 To leave or to stay: Lesson learnt from CEDAC
22.214.171.124.1 A life story: Motivation to start up farming as experience from trial migration
126.96.36.199.2 Motivation to quit farming after farming trail: A livelihood economy tell 264
188.8.131.52.3 Those who stay combining active labor with family or non-farm activities267
184.108.40.206.4 Will they return back to farming?
220.127.116.11 Youth‟s challenge in YAE: Lesson learnt
18.104.22.168.1 Youth‟s complex social characteristic: Development intervention disappointment?
22.214.171.124.2 There is no showcase that farming is high profitable
126.96.36.199.3 No financial support setting up farming: Is CEDAC rational?
188.8.131.52.4 Access to market
5.3.4 Existing policy in supporting youth integration in farming
5.4 Factors determine youth to settle in farming
5.4.1 Generation born and land access
5.4.2 Political integration at different time impacted on different integration in farming
5.4.3 Low level of education determines young people’s choice of farming
5.4.4 Gender and way of household subdivide land to children
5.4.5 Non-farm job is not easily accessible: Knowledge and skill demand but competition
5.4.5 Couple strategy
5.4.6 Investment in children education
5.5 Discussion and conclusion
CHAPTER 6: THE FUTURE PROSPECTS FOR YOUTH INTEGRATION IN FAMILY FARMING IN CAMBODIA SYNTHESIS OF STUDY RESULTS AND CONCLUSION
6.1 Economic sustainability of farming need a complementary from non-farm activities .
6.2 Motivation, perception on farming: to leave or to stay
6.3 Future prospect of youth and Cambodian family farming