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ISET Economist Blog

A blog about economics in the South Caucasus.
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Georgian Tea: Finding New Strength in Unity?
On Wednesday, May 27th, Maryam Naghsh Nejad from Institute for the Study of Labor (IZA-Bonn) presented her work in progress “Children of Afghan Migrants in Iran” to the ISET community. The study tries to identify whether there are disparities between Iranian natives and Afghan immigrants and what the sources of these discrepancies are.As Ms. Naghsh Nejad pointed out, Afghan refugees are one of the largest displaced population in the world. According to the data retrieved for 2012, there were between 2.4 to 3 million Afghan immigrants living in Iran. Afghan refugees started to arrive in Iran from 1978, in several different waves. Iran, a host country, did accept Afghan refugees but its policy towards these people has never been stable.
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Empowering Georgian ‘Plow Mothers’ (Gutnis Deda)
“The lion's whelps are equal be they male or female” – Shota Rustaveli    Giving women voice in company management may prove beneficial for performance. For instance, according to an influential Catalyst report, The Bottom Line: Corporate Performance and Women’s Representation on Boards, “companies that achieve [gender] diversity and manage it well attain better financial results, on average, than other companies.” In particular, they find that firms with the most women board directors outperform those with the least on such indicators as return on sales (ROS), return on equity (ROE) and invested capital (ROI).   While the Catalyst focused on the role of women in the governance of very large (Fortune 500) companies, women are also known to be a leading force in microfinance. Founded by Muhammad Yunus to provide Banladesh’s poor with micro loans, Grameen Bank’s lending operations were heavily biased toward women – 97% of all credit recipients were female. In her 2013 book Twenty-Seven Dollars and a Dream, Katharine Esty argues that women are comparatively better at exploiting small loans than males. While men tend to waste at least some of the money on alcohol and tobacco, women use it for investment (in farm animals, etc.), resulting in better outcomes (revenue from agricultural activities, ability to repay the loan, improvement in personal hygiene and health).  If all this is true for Bangladesh, where, according to the CIA World Factbook, 47% of the labor force is employed in agriculture, why should Georgia be any different? It is therefore quite disconcerting that the role of female leadership has so far been overlooked in Georgia’s agriculture. For instance, females are only one fourth of the membership in agricultural cooperatives that have been registered over the past couple of years by the Georgian government. Many of these are supported by the European Neighbourhood Programme for Agriculture and Rural Development (ENPARD) Initiative which seeks, among other things, to promote the livelihoods and productivity of Georgian smallholders. But, can this mission be successfully accomplished without fully engaging Georgia’s heroic women? WOMEN IN AGRICULTURE, AROUND THE WORLD AND IN GEORGIA It is well established that women play a key role in the agricultural and rural economies of developing countries. Rural women manage a myriad of household and farming activities including housekeeping, food processing, caring for animals, producing and marketing agricultural crops. While these activities do not count towards “economically active employment” in the formal (statistical) sense of the term, they significantly contribute to the wellbeing of rural households (FAO, 2011).  Georgia is no exception to this rule. Formal statistics may show that men have a leading role in the agricultural sector, but Georgia’s reality looks quite different. A recent study by Mercy Corps documents the seasonal routines undertaken by rural women in the Samtskhe-Javakheti region. All year around, women look after the animals, including pigs, chicken, and milking cows. In spring, women help men in land preparation and cultivation, while also being actively involved in summer time weeding, hoeing and irrigation. In autumn, women help with harvesting.  Additionally, after the harvest season is over, women make preserves by pickling, drying, and processing fruits and vegetables. Most importantly, they are the ones to take farm products to the market and have quite a bit of independence in deciding how to reinvest the money or use it for current family needs.  A recent survey ISET undertook in Western Georgia finds that there is only a tiny difference between the percentages of man and women involved in different farming activities (see table). Possible exceptions are application of chemicals and transportation. What this data mask, however, is that farming activities limit, if not completely eliminate, the leisure time of rural women in Georgia. Georgian men also work full time on their farms, yet they tend to specialize in seasonal works (ploughing, planting, harvesting, hay production, etc.), leaving all housekeeping chores and childcare to the women: their mothers, wives and daughters. GEORGIAN PLOWMEN (AND PLOW MOTHERS) IN HISTORY Rather symbolically, the Georgian term for ‘ploughman’ is gutnis deda, or ‘plow mother’ (gutani is Georgian for plough and deda for mother). According to a Caucasian myth in which this language originates, the ploughman was actually a woman driving a pair of plough bulls. This tradition is still alive in the Georgian highlands, e.g. in Tusheti. While men are herding the sheep, women would take over most other responsibilities, including ploughing.  As noted by the French historian Fernand Braudel, the roles of men and women in an agrarian society depend on the dominant farming technology. A key distinction is typically made between communities that adopt the heavy plough (which requires upper-body strength) and those that use the hoe. Moreover, there is empirical evidence (see Aleina, Nunn and Giuliano (2012)) that ancient agricultural methods have very enduring effects. For instance, women who are descendants of plough-users (as opposed to hoe-users) tend to work less outside of their homes. The plough was not as prevalent in Georgia’s ancient agriculture due to its mountainous relief. Not only linguistic analysis, but also ancient traditions suggest that Georgian women were extremely important in the country’s agriculture. In Georgian villages, the beginning of the tilling season used to involve unique rituals and preparations in which women played a key role. In Tusheti, women would start by digging out a bit of soil to “wake up the land”, and light candles on the right horn of the bull. Women also baked a triangular khmiadi (unleavened bread), a small piece of which was fed to the bulls. In some places, the bulls would be led into the fields by a pregnant woman – a symbol of fertility (Sikharulidze, 2014).  The Georgian agriculture has also gone through a process of technological change, triggering, among other things, a gradual masculinization of the ‘plough mother’ profession. This change was more pronounced in the lowlands, where the heavy plough was particularly useful. Yet, Georgian women continued to play a key role in Georgian agriculture and society. Too often in Georgia’s turbulent history men were called upon to defend (and die for) their homeland, leaving it up to the women to produce food, raise children and, ultimately, ensure the Georgian nation’s survival. THE WAY FORWARD: EDUCATING FUTURE (FEMALE) LEADERS Despite the active role women play in agricultural production, their rights to employment and subsequent managerial decisions are questioned in those very Georgian communities that specialize in agriculture. For instance, according to a baseline survey ISET conducted last year in Abasha, Senaki, Khobi, Tsageri, Chokhatauri, Lanchkhuti and Ozurgeti as part of the ENPARD project (ISET participates in the CARE-led ENPARD consortium), 63% of rural Georgians think that “when jobs are scarce, men should have more right to a job than women.”  According to the 2013 count by GeoStat, the number of male-headed households is approximately twice as high as woman-headed households in Georgia’s rural areas. Less than one third (about 30%) of Georgian farms were headed be women in 2012, 2 percentage points less than in 2009. Thus, instead of advancing we are going back.  There could be many ways to promote women to positions of decision-making and influence in Georgian agriculture and society. A good place to start is education and vocational training. There is considerable experimental evidence that, in traditional male-dominated societies, women typically shy away from the competition. The result is gender gap in education attainment and labor force participation, which is exacerbated by a negative male attitude towards female labor force participation (“the woman should stay at home”). The same body of research, however, suggests a number of effective ways to boost women’s aspirations and professional qualifications.  For instance, female enrollment rates can be increased if one simply informs them about expected returns to vocational training. In a fascinating study, Beaman, Duflo, Pande, and Topalova (2012) report how female leadership can change young women’s perceptions. In (randomly selected) villages where young women had an opportunity to observe female leaders as role models the gender gap in aspirations was reduced by one quarter and the gender gap in education attainment was completely eradicated! It goes without saying that donor-financed projects, such as ENPARD, could greatly benefit by incorporating lessons learned from state-of-the-art development research on gender mainstreaming. For instance, female participation in the coop movement could be boosted by evidence on the success of women-led farms and farmer organizations. Women could be targeted with scholarships to acquire relevant managerial skills. Finally, female participation in the governance of coops could also be made a criterion for technical support and grants.  Hopefully, Georgia will once again find the ways to utilize the power of its gutnis dedas to the benefit of all. In the end, this is about changing existing stereotypes, which will require a broad and well-coordinated educational effort of which ENPARD cannot be but a small part.   The article was produced with the assistance of the European Union through its European Neighbourhood Programme for Agriculture and Rural Development, Austrian Development Cooperation, CARE Austria or CARE International in the Caucasus. The contents are the sole responsibility of the authors and can in no way be taken to reflect the views of the European Union, Austrian Development Cooperation, CARE Austria or CARE International in the Caucasus.        
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Tea: a Potential Gold Mine of Georgian Agriculture?
On Friday, February 13, 2015 a debate on a new law on agricultural land ownership was held at Expo Georgia. The debate was organized by USAID’s G4G project and ISET. The debate’s panel comprised government officials, experts, foreign investors and businesses, and the event was moderated by Eric Livny, Director of the International School of Economics. The panel convened to explore issues surrounding foreign ownership of agricultural land in Georgia. In 2013, the Georgian government imposed a temporary moratorium on the acquisition of agricultural land by foreigners.
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Georgian Tangerines
On February 16th, ISET hosted David Bostashvili PhD. from the University of Houston. Dr. Bostashvili presented his job market paper: “Political Budget cycles and Civil Service in American State Governments”. The motivation for this paper was an observation that all levels of government tend to spend budgets right before elections. This phenomenon is known as the “political budget cycle”. Furthermore, evidence of the budget cycles is mostly studied in developing countries. There is a lack of study of this phenomenon in current literature from developed countries. Dr. Bostashvili used the establishment of civil service systems in the United States to study how it effects budget cycles.
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Save the Georgian Bazaar!
Open-air markets, so called bazaars, are considered by many Georgians to be relics of the past. Progressive people buy in supermarkets with all its amenities: clean areas, shiny floors, the temperature regulated at a convenient level, the products placed in order and often arranged tastefully. Only backward people buy in a bazaar if there is a supermarket available. This shift in shoppers’ preferences is illustrated by changes in the market structure. Five years ago the only big supermarket in Tbilisi was Goodwill, but the presence of supermarkets increased dramatically ever since, with branches to be found in almost every neighborhood. Currently, there are seven big supermarket chains in Tbilisi: Goodwill, Smart, Carrefour, Spar, Foodmart, Fursheti, and Fresco. Some of them, such as Carrefour and Goodwill, operate hypermarkets, while the others offer just ordinary supermarkets of variable sizes. What we can see here is reminiscent of how Georgian consumption patterns changed when other posh Western companies entered the market. American fast-food chains offer their French fries and burgers at pretty high prices in Georgia, even higher than in many Western countries, and yet it is often difficult to find a free seat in such places. Across the street, traditional Georgian restaurants offer high-quality, fresh food at much lower prices, but for the uplifting feeling of “eating like the Americans” many Georgians are willing to pay a price premium. Similarly, it seems to be a great feeling to “shop like the French” (in the Carrefour) or “purchase like the Germans” (some supermarkets sell a ridiculously large variety of German products, making one feel as if s/he is shopping in Germany except that prices here are so much higher than there). PRUDENT PURCHASING If people are struggling to make ends meet, as is the case for a considerable part of the Georgian population, they should probably not spend extra money for a fancy shopping experience. Going for the cheapest products in the bazaar is the more rational choice for most. Of course, if one is working more than 8 hours a day, shopping in a supermarket helps to save precious time. Yet for those many Georgians for whom time is not that scarce because they are not lucky to have a regular full-time job, searching and comparing prices is advisable. However, it turns out that price comparisons between supermarkets and bazaars are not as conclusive as one might expect. A test we conducted in January when collecting the prices of khachapuri ingredients (for our famous Khachapuri Index) in a sample of supermarkets and bazaars suggested that bazaar prices were indeed considerably lower: by 10% for eggs and milk, by 13% for butter, by 23% for flour, and by as much as 34% for cheese! On the other hand, yeast, which does not have a large share in the cost of khachapuri, was 10% more expensive in the bazaars. In March, we repeated this exercise in only two places: in Carrefour, which is considered by many to offer a very good value for money, and the “Dezertirebi” bazaar (close to the railway station). This time we took care to look for the cheapest prices in the bazaar, and yet, contrary to our previous experience, we found the supermarket (Carrefour, in our case) to be cheaper than the bazaar, by 2% for eggs and milk, and by 8% for flour. Bazaars did maintain their competitive edge in cheese (cheaper by 36%) and butter (by 9%). In March, we also looked at a range of other basic products, and it turned out that all of them were somewhat cheaper in the bazaar, namely chicken (by 1%), walnuts (7%), greens (20%), potatoes (20%), pork meat (58%), and apples (60%). While the picture is not totally clear-cut, it appears that for these basic products, demanded by all Georgian households, supermarkets tend to have higher prices than open-air bazaars (only in 4 out of 17 comparisons the supermarket was cheaper). ECONOMIC ADVANTAGES Besides stimulating competition among Georgian food retailers and in this way keeping prices at bay, bazaars also have positive effects on domestic producers of agricultural goods and the structure of the Georgian agricultural sector. The bazaar system is a completely non-bureaucratic way to deliver agricultural products to the end consumer. Smallholder farmers grow apples, tomatoes, potatoes, and whatever, and bring them to the market in the morning in exchange for cash (sometimes there are intermediary traders involved, collecting the produce from the villages and bringing it to the bazaar, which further increases efficiency). In this way, bazaars are an easily accessible possibility for smallholder farmers to transform their produce into some monetary income. This is similar to the extremely non-bureaucratic Georgian way of organizing the market for taxi services. Everyone who has got a car can attach a taxi sign to its roof and make some money by driving people around. In most other countries around the world, taxi drivers need a license (in Paris, for example, such a license is traded at prices between 200,000 and 250,000 euro). The Georgian approach leads to cheap taxis for everyone and provides many people who have few other prospects in the job market with (small) income. Bazaars are a similarly libertarian but also highly successful “Georgian” way to organize the food market. In the very long run, the strategic goal of the various efforts to increase productivity in agriculture is to make Georgia an exporter. Yet if Georgia’s access to export markets grows slower than productivity, the country might run into severe problems to ensure the livelihoods of those 50% to 55% of the Georgian population currently working in agriculture. In France, which has the worldwide highest agricultural productivity, one agricultural worker produces roughly the same output (measured in money) as 60 Georgian workers. Raising agricultural productivity in a country with a large share of rural population and a democratic system of governance is an extremely delicate matter. Fast entry by new high tech producers will trigger mass migration to the cities, which are already plagued by high rates of unemployment and may not be able to provide adequate jobs or housing for the newcomers. What Georgia needs is a gradual transition, whereby smallholder farmers are given the opportunity to develop and integrate into existing or new value chains. This is precisely the aim of such donor initiatives as the EU-funded ENPARD project, which fosters the formation of agricultural cooperatives. In line with such a “gradualist” approach, the aim should be to progressively substitute imported agricultural goods by domestically produced ones (“import substitution”). Bazaars can be instrumental in this respect, as – due to the lack of bureaucracy, minimum delivery amounts, and long-run contracts – any little improvement in the production process of a farm directly translates into additional income for the smallholder farmers. In the presence of bazaars, adopting new techniques or “process innovations”, such as farmer organizations incubated by ENPARD, will be rewarded immediately, without the necessity for large capital investments and complicated planning. KEEP IT ALIVE The existence of bazaars is threatened in three respects, namely preferences of customers (as mentioned above), overregulation, and lack of government support. While one can hope that the preferences of Georgians will be aligned with their meager budgets (and there is little one can do to influence those preferences), the largest threats are related to government policies. It is important that in view of all the great opportunities emerging from the Association Agreement (AA) with the European Union, Georgia does not introduce sanitary regulations and bureaucratic requirements which can be easily met by companies in Europe (or advanced Georgian producers) but pose insurmountable obstacles for Georgian smallholders and bazaars. European representatives claim that the AA allows for exceptions and adjustment to local conditions, yet it is important that these exceptions are really made. Overregulation is a great danger for a fragile economy in a developing country, and the government would be well advised to take Montesquieu’s verdict seriously when he said: “Useless laws weaken the necessary laws.” In addition, bazaars should get the same consideration as other retail businesses in terms of subsidies and infrastructure. In Zestafoni, the bazaar hall was nicely renovated recently, yet in Tbilisi bazaars are not always that attractive. Lack of available parking is a particularly acute problem for many bazaars. We are not arguing that bazaars should be treated preferentially compared to supermarkets, but whatever advantages were granted to supermarkets (and their investors) should also be given to bazaars. To sum up, Georgia has to develop its economy taking into account its low starting point. In the political debate, one rarely hears an honest admission that Georgia will be a relatively poor country for decades to come. This is true even if the high-flying predictions about future Georgian growth would turn out to be correct, e.g. 6% annual growth until 2020. In the current situation, and arguably for many years to come, it would be unfortunate for the Georgian economy to dispose of its bazaars.   The article was produced with the assistance of the European Union through its European Neighbourhood Programme for Agriculture and Rural Development, Austrian Development Cooperation, CARE Austria or CARE International in the Caucasus. The contents are the sole responsibility of the authors and can in no way be taken to reflect the views of the European Union, Austrian Development Cooperation, CARE Austria or CARE International in the Caucasus.        
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