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Value Of Social Capital To Mid-Sized Northern Plains Farms

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  • Gustafson, Cole R.

Abstract

As farms increase in size, operators face the decision of remaining loyal to local merchants or obtaining volume discounts from distant input suppliers. When farmers bypass local merchants and buy inputs in volume, they often realize price discounts but forego many services including credit forebearance. When farmers buy locally, they pay higher prices, which decreases profits and increases financial risk, but generates social capital which can be drawn upon during periods of economic adversity. A theoretical model of farm financial risk evaluates borrower behavior in light of cash flow constraints, volume discounts, and social capital. Results delineate financial risks involved and value of social capital.

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Bibliographic Info

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2005 Annual meeting, July 24-27, Providence, RI with number 19169.

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Date of creation: 2005
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Handle: RePEc:ags:aaea05:19169

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Keywords: Capital; financial risk; simulation; social; stochastic; Agricultural Finance;

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  1. John Maluccio & Lawrence Haddad & Julian May, 2000. "Social capital and household welfare in South Africa, 1993-98," Journal of Development Studies, Taylor & Francis Journals, vol. 36(6), pages 54-81.
  2. Lindon J. Robison & Jan L. Flora, 2003. "The Social Capital Paradigm: Bridging across Disciplines," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(5), pages 1187-1193.
  3. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2000. "The Role of Social Capital in Financial Development," NBER Working Papers 7563, National Bureau of Economic Research, Inc.
  4. Shideler, David W., 2004. "Determinants Of Individual Social Capital Investment," 2004 Annual meeting, August 1-4, Denver, CO 20224, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  5. Saxowsky, David M. & Gustafson, Cole R. & Ali, Mir B. & Braaten, Joan M. & Rotering, Jeff, 1987. "Economic Impact of North Dakota Laws that Permit Delayed or Partial Repayment of Agricultural Debt � July 1, 1986," Agricultural Economics Reports 23462, North Dakota State University, Department of Agribusiness and Applied Economics.
  6. Robison, Lindon J. & Siles, Marcelo E. & Schmid, A. Allan, 2002. "Social Capital And Poverty Reduction: Toward A Mature Paradigm," Agricultural Economic Report Series 10941, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  7. Mogues, Tewodaj & Carter, Michael R., 2004. "Social Capital and the Reproduction of Inequality in Socially Polarized Economies," Staff Paper Series 476, University of Wisconsin, Agricultural and Applied Economics.
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