THE PROCESS OF CHOICE IN HIGHER EDUCATION IN BRAZIL:
THE OVERLAPS BETWEEN HUMAN CAPITAL AND SOCIAL CAPITAL
AS REDUCERS OF UNCERTAINTY AND RISK
Cleide Moretto
University of Passo Fundo

Despite the enormous obstacles in terms of the budgetary restrictions of Brazilian families, the number of enrollments in higher education has been growing, mainly in the Southeast. We perceive that the “culture” of higher education has been consolidating itself in the country, even though the structure of formal employment reveals that the number of unemployed with this level of education is increasing and there are profound gaps between the work alternatives and the different capabilities required. The ideology of human capital is put in check, which brings great uncertainty and risk at the moment of students going forward with their studies and choosing a profession.

The present research proposes to deepen the analysis of the choice process in higher education of Brazilian university students, so as to show the possible overlaps between the individual component involved in the conception of human capital and the collective behavior present in the concept of social capital. For this, we seek, specifically:
To analyze the process of information obtainment of university students in a scenario of changes and imbalances observed in the recent Brazilian labor market, marked by growing informalization of the productive activities and the work relationships. We intend to contextualize the choice of career of the students, still traditionally related to the model of industrial salaried society of the past, in this new scenario of productive restructuring, economy of services and the process of informality;
To identify the role of the different institutions associated to the process of university choice, such as family, school, university and the State, as active forms of social organization. We question the form in which students utilize the social rules to achieve their goals and how they affect their level of uncertainty and their behavior in relation to the future practice of their university formation.

This study is justified by the need to diminish the individual and social costs involved in a context of scarcity of adequate capabilities in the labor market and in the risk involved in the possibility of being overqualified in the Brazilian labor market.


ALLOCATION OF LABOR IN AGRICULTURE:
FAMILY FARMS AND “PLURIACTIVITY”
Rubens Nunes
University of São Paulo

The goal of the research is to examine the economic rationality underlying the allocation of labor in and out family farm. A widespread and robust organization such as family farm must have a economic rationality. Some market imperfections can be suitable microfoundations to explain the survival of family farming. Family farm is understood as a specific organizational form, different from a firm constituted by labor contracts. In family farm, ownership of productive resources, management and direct work are executed by the very same individuals. Relationship between family members allows to specific solutions to agency problems. Utility functions of family members are supposed not independent.

Choice of work place (in-farm or out-farm) is due to relative efficiency of alternative ways to conduce transactions with labor and agricultural products, given prices and transaction costs in inputs and outputs markets. In absence of transaction costs, it would be indifferent where family members work, since factors and products markets clear and arbitage condition holds.
Literature on recent rural development in Brazil stressed the importance of non-agricultural jobs to rural families income. “Pluriactivity” is related to the growing participation in family farmers income of wages earned out of the farm in agricultural or non-agricultural activities, in rural or urban areas. “Pluriactivity” may be seen as a strategy suitable to maximize expected value of family aggregate income, under uncertainty in labor and product markets.
The main hypothesis is that high transaction costs in labor markets (e.g. searching costs), induce an apparent misallocation of family work force, with low productivity of in-farm work (and maybe high productivity of land and capital). High transaction costs in product markets are supposed to increase the share of out-farm labor and the in-farm consumption of agricultural output. Different from the usual approach, I suspect that, at least for a large class of Brazilian family farmers, the choice of a specific allocation of labor is better explained by considering failures in alternative markets where family members could obtain higher earnings.

It is argued that the allocation of family labor inside and outside of the farm depends on costs of using labor market. In absence of transaction costs, the problem of family farm would be meaningless.

Interviews with a selected sample of family farms will be made, in order to know the composition of family income, in and out farm labor time, and basic information on each farm. It will be necessary to make questions about transaction costs in products and labor markets, such as frequency and time wasted in job searching. Hypothesis will be translated in a model in which the share of out-farm (in-farm) labor is the dependent variable and proxies of transaction costs are included among independent variables.


Origin and Quality Programs for Argentine Beef:
Three cases and the Irremediable Situation of Argentine Beef
Hernán Palau
Buenos Aires University

This ongoing research project examines the current status of quality beef trade in Argentina employing the “multiple case study” method.  The economic and strategic aspects of each case are described in the light of the New Institutional Economics, together with production and marketing value-adding alternatives. These cases – “Prinex-Exal”, “Pampas del Salado” and “Carne Angus Certificada”– are three origin and quality assurance case studies that add value to Argentine beef. Origin and quality assurance systems for beef have been developed as a way of differentiating products in order to satisfy increasingly demanding European and North American consumers. This led to gaining new markets and obtaining higher prices and profit margins. Such systems are based on institutional, organisational, technological and commercial innovations that are ultimately co-innovations, since they derive from generally accepted collective action processes. Although such designs improve competitiveness in the livestock and beef sector, they are difficult to replicate massively because the strong influence of path dependency, particularly within informal institutional and organisational environments – 50% of the beef market in Argentina is informal –, and are unable to achieve sustainable competitiveness. The object of this project is to identify why under a distorted institutional environment where the rule of law is not fully enforced and where the business culture is informal and lacks clear rules of the game, it is difficult to implement and maintain origin and quality assurance systems, affecting any possibility of widely applying and developing these new designs, thus turning the argentine livestock sector into an irremediable situation. Finally, rather than differentiating themselves through continuous improvement processes and added value, players in the meat chain employ tools that reduce competitiveness of the systems involved and increase transaction costs.


JUDICIAL SYSTEM AND TRANSACTION COSTS
Ivan Ribeiro
University of São Paulo

The judicial system plays an important role in assuring property rights, enforcing contracts and reducing transaction costs (North, 1990). Cooter and Rubinfeld’s (1989) model proved that if going to trial costs one party more than it costs the other, even a nuisance claim has chances to be settled for a positive sum of money. This research focuses on four aspects of the Brazilian legal system that are likely to increase these costs and asymmetries, namely the constitutional provision of free justice, a poorly structured settlement process, the lack of separation between the adjudication and the negotiating phases and the weak constrains to avoid unethical practices. The goal is to measure these impacts over the organizational litigant and indicate directions for Justice reform in Brazil.

The heavy caseload of Brazilian judges leaves room for extra-procedural practices. It is usual that judges threaten the defendants with an unfair judgment to force the party into an agreement. This is only possible because the judge responsible for adjudicating the trial is also the one who conducts the settlement negotiations. The result is an added incentive for frivolous claims, since it increases the value of defendant’s losses. On top of that, the non-structured form of settlement negotiation makes the possibility of an agreement lower, due to the small amount of information exchange between the parties.

When this scenario is met by weak enforcement of the rules to curb unethical practices and a depressed labor market for lawyers, the potential gains from frivolous suits is two-folded. It is further enhanced by the constitutional provision for free justice, which reduces the costs for the plaintiffs. The initial trend for settlements is then distorted. The defendant is now forced to bear the extra costs of going to trial to avoid the much greater potential loss for opportunistic behavior.

Empirical data collected so far supports these ideas. They are being further tested through regression analysis of data from five large companies and the theoretical framework of repeated games (Hammit, Carrol and Relles, 1985) will be central to testing the disincentives to settlements.


QUASI RENT APPROPRIATION: THE SPECIALTY COFFEE GROWERS X PROCESSING INDUSTRY RELATION
Sylvia Saes
University of São Paulo

Problem
The negotiation between participants of a contractual relation whose main element is investment on specific assets creates a quasi rent conceding one party or the other (or both) some ex-post bargain power. The quasi rent value of the asset is the difference between the value generated in the specific activity and its best alternative use.
Does this division of the quasi rent of the coffee grower x industry relation move to efficiency?

Justification
If the approach that the property rights is validated, i.e., that an efficient transaction would imply that the party investing in a specific asset should keep the residual property rights, a better orientation of public policies would enable specialty coffee farmers to obtain a higher income.

Theory and hypotheses
Generally, a long-termed although informal contractual relation between industry x coffee growers involving a specific asset would avoid the result of the prisoner’s dilemma, i.e., it is a cooperative game with multiple results concerning the division of the quasi rent. According to Grossman and Hart, the incompleteness of the contracts may lead to an incompatible ex-post return to one of the parties that does not compensate ex-ante investments.

Fitter & Kaplinsky argue that producers and industry would efficiently appropriate the quasi rent if the consumers identified which of them is the differentiation actor. Producers most likely appropriate part of the quasi rent if consumers identify this differentiation as land-related properties. Alternatively, industry keeps most of the quasi rent if consumers recognize the product brand related to the industry ´s image rather than either quality or grower.

Methodology
The coffee chain will produce an empirical test, based on the Transaction Cost Economics and the Property Rights supported by the Game Theory. The investigation of the efficiency in the division of the quasi rent is grounded on (a) the gains obtained by the actors investing in specific assets, and (b) the consumer perception.

Expected results
This analysis will examine the validity of the theory of the efficient allocation of the residual rights of property, and propose public policies.


THE ROLE OF PENSIONS FUNDS AND SOCIAL DEVELOPMENT IN BRAZIL
José Roberto Ferreira Savoia
University of São Paulo

Problem
To analyze the role of pension funds in the social development of the Brazilian economy, discussing its capacity to provide funds on a sustainable basis to other sectors.

Introduction
The system of retirement income security in Brazil is based on three Pillars: Pillar 1 is a traditional intergenerational-transfer PayGo system of Social Insurance responsible for the basic retirement income needs of workers and their dependents, and Pillars 2 and 3, which as a rule coexist side-by-side rather than one on top of the other, are comprised of “closed” complementary pension funds (similar to “trusteed” pension funds in certain OECD countries), and “open” pension products marketed by insurance companies.
The greatest dilemma faced by regulators relates to the degree of discretionary freedom that should be granted to the respective systems’ administrators. In most “common law” countries, for example the US, UK, Ireland and Netherlands, the “prudent man” rule has been adopted, a rule that gives administrators greater latitude in decisions relating to the allocation of financial resources, and also greater responsibility for the consequences of these decisions, before strict and severe interference from the authorities.
In Brazil, the conditions for supervision are precarious, the capacity for inspection is limited and legal punishments of the agents who fail to adequately protect the rights of participants are light or difficult to enforce. Although the intention in the mid-term is to improve this picture, it would not be prudent to conceive a totally free-market in the short term. The financial environment in Brazil is going through quick changes and a process of accentuated innovation.

Question
What is the role of pension funds in providing funds to the development of the Brazilian Economy?

Objectives
To understand better the role of pensions; to discuss future development of investments regulation for institutional investors; to discuss economic impacts of incentives and to examine what are the institutions which can lead the process of development promotion; to evaluate new initiatives in Europe, USA an other parts of the world that focused in the contribution of institutional investors to finance the development and to understand what was positive and negative about those initiatives and identify what should also be implemented in Brazil.

Methodology
Available data on pension funds’ investments and an statistical model to project its evolution;
Case study: a general view of international experiences;
A cross-country analysis of investment’s regulation and the consequences for social development.

Expected results and conclusions
Discussion of the role of pension funds in Brazil and its efficiency in the social development;
Discussion of the most relevant aspects of international regulation and institutional arrangements to pensions.


WATER SCARCITY AND INSTITUTIONAL CHANGE:
ANALYSIS OF THE REGULATION OF WATER RESOURCES IN BRAZIL
Roberto Fava Scare
University of São Paulo

 The growing demand for water resources, both in aspects of quantity and quality, increases the dispute of users for utilization of the good. The perception of scarcity causes water to be considered a natural resource with economic, strategic, and social value. Alston & Mueller (2002) state that when resources become more or less scarce, the reigning regime of property rights can reduce the value of the asset. The losses encourage those involved to change the property rights, seeking a form more adjusted to reality.
This perception has led governments around the world to reorganize the institutional environment and redefine new property rights through a system of participative and decentralized management that stimulates the utilization of the resource in a rational manner.
However, this process is not homogeneous and simultaneous. The moment of institutionalization and the degree of complexity of each environment, both nationally and internationally, vary greatly. This study seeks to identify the causes of the variation among the institutional environments in various countries and identify the relation between scarcity and modification in the regulation of the environment in Brazilian states.
The study is based on the theoretic approach of evolution analysis of the institutional environment presented by North (1990; 1994), on the definition of property rights proposed by Eggertsson (1990), on the emergence and economic analysis of property rights presented by Barzel (1997), and on the model of supply and demand of property rights proposed by Alston, Libecap & Mueller (1999).
To this end the study is divided in two parts. First, a qualitative study is conducted of the history of the evolution of the international institutional environment, seeking an understanding of the changes that occurred in Brazil and the evolution of the Brazilian case until reaching the present system of water resource management.
Second, a quantitative analysis is done of the influence of scarcity on the proposing and passing of state laws. The study further seeks to identify the influence of water scarcity on the velocity with which laws go through the system and on the complexity of the institutional environment.
The study concludes that while the process of environment modification does not occur in a linear fashion, scarcity possesses a significant influence on the velocity of environmental change and on its degree of complexity.

 
INTERFIRM ARRANGEMENTS IN DIFFERENT INSTITUTIONAL ENVIRONMENTS: MCDONALD’S GOVERNANCE STRUCTURES
Elizabeth M.M.Q. Farina, Paulo F. Azevedo, And Vivian L. S. Silva
University of São Paulo, FGV, and Federal University of São Carlos, respectively

To eat a Big Mac is to taste the same thing – good or bad – anywhere in the world. What most calls attention in this statement is not the geographic dispersion, even though this is greater than one can imagine, but the diversity of economic environments to which a single entrepreneurial strategy is subjected.

The identification of the effects of differences on the “rules of the game”, according to North (1990)’s terminology to institutional environment, on the establishment of interfirm contractual arrangements, though it is an issue recognized as being of great relevance to New Institutional Economics has been the object of few empirical studies. In part, this situation stems from the difficulty of identifying and isolating the effects of an institutional change – reason for what most research involves historic cases or comparative analysis among countries, in which however, it is impossible of crediting the distinct patterns of contractual arrangements employed to the differences among the institutional environments. For this reason, a comparative study that allows control over several variables, such as products and entrepreneurial strategies, can identify with greater precision the possible relationships between the variables of the institutional environment and the governance structures.

In this context we propose a comparative analysis of the influence exerted by different institutional environments on the standard of coordination upstream adopted by the big one fast food franchise chain in the world, McDonald’s, in its various markets. In the case of international franchise chains like McDonald’s, that manages 30,000 restaurants in 118 countries serving 46 million customers each day, the standardization requirement poses additional challenges due to the diversity of the institutional environment. This diversity, in turn, can induce the establishment of different governance structures utilized by the chain to supply their own or franchised units. Additionally, standardization allows control of variables, such as type of product and differentiation strategies, isolating the effect the differences in the institutional environment exert on governance structures in the upstream coordination.

Based on a standardization interview agenda custom-made for this study, we propose a comparative analysis of McDonald’s case study in different countries. Some preliminary results were obtained from a comparison between Brazil and France. For instance, it was identified that in Brazil, McDonald’s employs governance structures that provide greater control over transactions, such as quasi-vertical integration or dedicated dealing contracts, when compared to France. Among other factors, this result may be due to an important institutional dimension: the competition policy that in France is more restrictive than in Brazil regarding vertical coordination.


COMMUNITY BASED LAND REFORM IN BRAZIL:
A STOCHASTIC FRONTIER ANALYSIS
Hildo Meirelles de Souza Filho
Federal University of São Carlos

This research is based on an evaluation of Cédula da Terra Community Based Pilot Program, whose conception, mechanisms and operation represents a shift from traditional expropriatory-distributivist land reform approach. The Program is a pilot project funded by the World Bank, which uses real-estate market mechanism rather than expropriation as instrument of land redistribution to the poor. The main characteristics of the Cédula da Terra Program are:
Cédula da Terra is a decentralized program, in the sense that it establishes general criteria for the asset redistribution process in a determined region and provides funds to aid the beneficiaries' own initiatives. It sets a limit in the prices of land acquisition and in the total financing, leaving to the beneficiaries themselves the decision on land selection, the negotiation of land acquisition, and the definition of the productive ventures to be implemented;
Self-selection of the beneficiaries; in other words, the Program does not select the participants, but merely defines the basic characteristics of the population of potential beneficiaries and the conditions of access. Then, those interested in participating in the program seek it out being served on a first-come first-serve basis;
Participation in the Program is collective and not individual, as only associations of farmers can receive credits;
Land is not distributed, but sold through an operation of agrarian credit (complemented by other lines of credit) contracted by the benefiting association and the financial agent of the Program. The obligation of land payment creates incentives for production and reduces the cost of monitoring on the part of the financial institutions.

Data was collected from 309 beneficiaries of Cédula da Terra, providing information to perform an impact evaluation. An stochastic frontier production model has been used to perform an evaluation of technical and allocative efficiency of beneficiaries. Preliminary results showed that schooling, extension service, credit, associative production and subsistence production reduce technical and allocative inefficiency. Implications for policies are straightforward: improve credit and extension services institutional arrangements as a short and medium term policy, and education in the long run.


AN EMPIRICAL ANALYSIS OF THE VENEZUELAN INFORMAL COMMERCE INSTITUTIONS: IMPLICATIONS FROM A CASE STUDY FOR UNDERSTANDING THE ENTREPRENEUR- SURVIVOR DIFFERENCES
Wladimir Zanoni
Centro de Divulgación del Conocimiento Económico (CEDICE),
Caracas, Venezuela

How and what economic institutions shape the informal sector dynamic in Venezuelan urban areas? How do politics, culture and household characteristics, affect these institutions? Is it relevant to understand household efficiency differences in order to improve public policy design?

As a result of an ongoing research about the informal sector dynamics in Venezuelan urban areas, this study describes and models informal institutions which are characteristics of the informal commerce. The research test the hypothesis that, contrary to the common opinion that informal commerce transactions take place in a without rules environment, it does exist a complete set of informal institutions underlying economic relations in the informal commerce. Informal laborers form a heterogeneous world where entrepreneurs and survivors coexist. In order to reduce the informal sector size the study claim for two kind of different “micro level” policies depending on what group is the policy intended to affect: survivors or entrepreneurs.