Institutions and Infrastructure for Market Development

One of the major objectives of the Infrastructure and Institutions for Market Development program is to study market dynamics in the presence of asymmetric information, heterogeneity of small holders, and inadequate provision of institutions and infrastructure. Within this context, the program seeks to answer the following questions: How markets function? What roles different institutions play in supporting market exchange and how to design, transfer, and maintain these institutions and access to infrastructure. In addition, the research program aims to identify the bottlenecks (physical or institutional) impede investments in rural infrastructure services. It helps design strategies for institutional arrangements that help override such bottlenecks through adequate access to public infrastructure needed to enhance the environment in which private sector activities take place. The program specifically emphasizes the need to foster institutional innovations to enhance infrastructure investments.

In addition to carrying out its own research, the program aims at strengthening capacity of policy makers and researchers in targeted countries to undertake policy research concerning the role of institutions and infrastructure.

The specific program objectives regarding infrastructure are the following:

  • Estimate the existing complementarities between the different types of public infrastructure and the endowments of private assets (human capital, financial-physical capital or social capital), which are already possessed by rural populations, in order to maximize the impact of public infrastructure investment.
  • Identify investment opportunities that generate the largest multiplier effects and that enhance the attraction of public and private investments for the rural sector.
  • To increase the private and social profitability of the executed investments by identifying the critical mass required and the appropriate mix of infrastructure and institutions.

The specific program objectives regarding institutions are the following:

  • To conduct empirically sound research on why and how institutions matter and how these institutions emerge and evolve over time and their linkages with access to infrastructure and market development.
  • To understand the underlying market institutions—such as contract farming, vertically integrated schemes, market information systems, commercial rules and laws, commodity exchanges, and producer and trader associations—needed to enhance the environment in which private sector activities take place.
  • To understand the complexity and diversity of institutional arrangements for facilitating market exchange, in particular the critical enforcement of property rights and economic coordination of exchange.