Advanced Search
MyIDEAS: Login

Why Don't Lenders Finance High-Return Technological Change in Developing-Country Agriculture?

Contents:

Author Info

  • Blackman, Allen

    ()
    (Resources for the Future)

Abstract

Most of the literature attributes credit constraints in small-farm developing-country agriculture to the variability of returns to investment in this sector. But the literature does not fully explain lenders’ reluctance to finance investments in technologies that provide both higher average and less variable returns. To fill this gap, this article develops an information-theoretic credit market model with endogenous technology choice. The model demonstrates that lenders may refuse to finance any investment in a riskless high-return technology— regardless of the interest rate they are offered—when they are imperfectly informed about loan applicants’ time preferences and, therefore, about their propensities to default intentionally in order to finance current consumption.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.rff.org/RFF/documents/RFF-DP-01-17.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-01-17.

as in new window
Length:
Date of creation: 01 Apr 2001
Date of revision:
Handle: RePEc:rff:dpaper:dp-01-17

Contact details of provider:
Web page: http://www.rff.org
More information through EDIRC

Related research

Keywords: : agriculture; asymmetric information; credit; developing country; technology adoption.;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Besley, T., 1992. "How Do Market Failures Justify Interventions in Rural Credit Markets?," Papers 162, Princeton, Woodrow Wilson School - Development Studies.
  2. Bose, Pinaki, 1998. "Formal-informal sector interaction in rural credit markets," Journal of Development Economics, Elsevier, vol. 56(2), pages 265-280, August.
  3. Pender, John L., 1996. "Discount rates and credit markets: Theory and evidence from rural india," Journal of Development Economics, Elsevier, vol. 50(2), pages 257-296, August.
  4. Huppi, Monika & Feder, Gershon, 1990. "The Role of Groups and Credit Cooperatives in Rural Lending," World Bank Research Observer, World Bank Group, vol. 5(2), pages 187-204, July.
  5. Gerhard Clemenz & Mona Ritthaler, 1992. "Credit markets with asymmetric information : a survey," Finnish Economic Papers, Finnish Economic Association, vol. 5(1), pages 12-26, Spring.
  6. Hellmuth Milde & John G. Riley, 1986. "Signalling in Credit Markets," UCLA Economics Working Papers 334, UCLA Department of Economics.
  7. Hoff, Karla & Stiglitz, Joseph E., 1998. "Moneylenders and bankers: price-increasing subsidies in a monopolistically competitive market," Journal of Development Economics, Elsevier, vol. 55(2), pages 485-518, April.
  8. Jaffee, Dwight M & Russell, Thomas, 1976. "Imperfect Information, Uncertainty, and Credit Rationing," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 651-66, November.
  9. Zeller, Manfred & Schrieder, Gertrud & von Braun, Joachim & Heidhues, Franz, 1997. "Rural finance for food security for the poor," Food policy reviews 4, International Food Policy Research Institute (IFPRI).
  10. Bell, Clive, 1990. "Interactions between Institutional and Informal Credit Agencies in Rural India," World Bank Economic Review, World Bank Group, vol. 4(3), pages 297-327, September.
  11. Bell, Clive, 1988. "Credit markets and interlinked transactions," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 16, pages 763-830 Elsevier.
  12. Sharma, Manohar & Zeller, Manfred, 1997. "Repayment performance in group-based credit programs in Bangladesh: An empirical analysis," World Development, Elsevier, vol. 25(10), pages 1731-1742, October.
  13. Stiglitz, Joseph E, 1990. "Peer Monitoring and Credit Markets," World Bank Economic Review, World Bank Group, vol. 4(3), pages 351-66, September.
  14. Feder, Gershon & Just, Richard E & Zilberman, David, 1985. "Adoption of Agricultural Innovations in Developing Countries: A Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 33(2), pages 255-98, January.
  15. Mark Bagnoli & Ted Bergstrom, 2005. "Log-concave probability and its applications," Economic Theory, Springer, vol. 26(2), pages 445-469, 08.
  16. Carter, Michael R., 1988. "Equilibrium credit rationing of small farm agriculture," Journal of Development Economics, Elsevier, vol. 28(1), pages 83-103, February.
  17. Aleem, Irfan, 1990. "Imperfect Information, Screening, and the Costs of Informal Lending: A Study of a Rural Credit Market in Pakistan," World Bank Economic Review, World Bank Group, vol. 4(3), pages 329-49, September.
  18. Braverman, Avishay & Guasch, J. Luis, 1986. "Rural credit markets and institutions in developing countries: Lessons for policy analysis from practice and modern theory," World Development, Elsevier, vol. 14(10-11), pages 1253-1267.
  19. Siamwalla, Ammar, et al, 1990. "The Thai Rural Credit System: Public Subsidies, Private Information, and Segmented Markets," World Bank Economic Review, World Bank Group, vol. 4(3), pages 271-95, September.
  20. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Casillas, Gabriel & Mitchell, Paul D., 2003. "Rural Credit Rationing And National Development Banks In Developing Countries," 2003 Annual meeting, July 27-30, Montreal, Canada 22199, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:rff:dpaper:dp-01-17. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Webmaster).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.