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Farm credit and credit demand elasticities in Shaanxi and Gansu

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  • Turvey, Calum G.
  • He, Guangwen
  • MA, Jiujie
  • Kong, Rong
  • Meagher, Patrick

Abstract

This paper empirically estimates individual household credit demand elasticities based on 897 farm households surveyed in Shaanxi and Gansu provinces in the People's Republic of China (PRC) in October 2009. We used survey-based experimental techniques to extract individual household credit demand functions from which we estimated point demand elasticities. From a theoretical point of view, we proposed that as interest rates fell the demand for credit increased in elasticity, and this appears to hold in our data. We find a range of elasticities with mean point estimates of about −0.6. We find that nearly 20% of farm households have nearly perfectly inelastic demands for credit but we also find that nearly 20% have elasticities above −0.75 including some 15% that have elasticities greater than −1.0. Previous studies that have argued against credit policies because of the low inelasticity of demand do not generally hold. There is much heterogeneity in credit demand and we would argue that a full spectrum of targeted credit policies can be used to address differences across farms.

Suggested Citation

  • Turvey, Calum G. & He, Guangwen & MA, Jiujie & Kong, Rong & Meagher, Patrick, 2012. "Farm credit and credit demand elasticities in Shaanxi and Gansu," China Economic Review, Elsevier, vol. 23(4), pages 1020-1035.
  • Handle: RePEc:eee:chieco:v:23:y:2012:i:4:p:1020-1035
    DOI: 10.1016/j.chieco.2012.05.004
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Calum Turvey & Xiaolan Xu & Rong Kong & Ying Cao, 2014. "Attitudinal Asymmetries and the Lender-Borrower Relationship: Survey Results on Farm Lending in Shandong, China," Journal of Financial Services Research, Springer;Western Finance Association, vol. 46(2), pages 115-135, October.
    2. Joseph Chisasa, 2016. "Determinants of the demand for credit by smallholder farmers: survey results from South Africa," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 9(1), pages 26-46.

    More about this item

    Keywords

    Credit demand; Credit demand elasticities; Duration elasticity; Tweedie regression; Agricultural finance; People's Republic of China; PRC;

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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