IDEAS home Printed from
   My bibliography  Save this article

Effects of credit constraints on household productivity in rural China


  • Fengxia Dong
  • Jing Lu
  • Allen M. Featherstone


Purpose - The purpose of this paper is to examine the effect of credit constraints on agricultural productivity in China. Design/methodology/approach - Using data from a rural financial survey, a switching regression model is used to account for endogeneity and heterogeneity. Carter presents three ways that credit might affect the production functions; a shift along a given production surface by allowing an optimal level of inputs, a shift the production surface out by allowing the purchase of more efficient inputs, and the third is to increase net revenue by more intensive use of fixed inputs and resources. Thus, the effects of factors on agricultural productivity may not be independent of credit status; therefore, separate functions for credit-constrained and non-constrained households are examined. Findings - Empirical estimates of the impacts of credit constraints on agricultural productivity are provided for the Heilongjiang province, a major agricultural production area, in Northeast China. By removing credit constraints, average agricultural productivity was estimated to be increased by 75 percent. Under credit constraints, labor inputs, along with a farmers' education, cannot be fully employed because of an inappropriate mix of inputs. Research limitations/implications - Young farmers may not be able to leverage their comparative advantage for physically intensive farm work under credit constraints. Because of data limitations, the research does not include information on informal credit in the estimation, which may underestimate the effects of credit constraints. Originality/value - This study provides an analysis of the impacts of credit constraints on rural household productivity for the Heilongjiang province, a major agricultural production region, in Northeast China.

Suggested Citation

  • Fengxia Dong & Jing Lu & Allen M. Featherstone, 2012. "Effects of credit constraints on household productivity in rural China," Agricultural Finance Review, Emerald Group Publishing, vol. 72(3), pages 402-415, November.
  • Handle: RePEc:eme:afrpps:v:72:y:2012:i:3:p:402-415

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Glennon, Dennis & Nigro, Peter, 2005. "Measuring the Default Risk of Small Business Loans: A Survival Analysis Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(5), pages 923-947, October.
    2. Escalante, Cesar L. & Brooks, Rodney L. & Epperson, James E. & Stegelin, Forrest E., 2006. "Credit Risk Assessment and Racial Minority Lending at the Farm Service Agency," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(01), April.
    3. Allen M. Featherstone & Christine A. Wilson & Terry L. Kastens & John D. Jones, 2007. "Factors affecting the agricultural loan decision-making process," Agricultural Finance Review, Emerald Group Publishing, vol. 67(1), pages 13-33, May.
    4. Ambrose, Brent W & Capone, Charles A, 2000. "The Hazard Rates of First and Second Defaults," The Journal of Real Estate Finance and Economics, Springer, vol. 20(3), pages 275-293, May.
    5. Sam Hakim & Mahmoud Haddad, 1999. "Borrower attributes and the risk of default of conventional mortgages," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 27(2), pages 210-220, June.
    6. Erik Heitfield & Tarun Sabarwal, 2004. "What Drives Default and Prepayment on Subprime Auto Loans?," The Journal of Real Estate Finance and Economics, Springer, vol. 29(4), pages 457-477, December.
    7. Nwoha, Ogbonnaya John & Ahrendsen, Bruce L. & Dixon, Bruce L. & Chavez, Eddie C. & Hamm, Sandra J. & Settlage, Daniel M. & Danforth, Diana M., 2005. "Farm Service Agency Direct Farm Loan Program Effectiveness Study," Research Reports 15772, University of Arkansas, Arkansas Agricultural Experiment Station.
    8. Jonathan B. Dressler & Jeffrey R. Stokes, 2010. "Survival analysis and mortgage termination at AgChoice ACA," Agricultural Finance Review, Emerald Group Publishing, vol. 70(1), pages 21-36, May.
    9. Jeffrey R. Stokes & Brent A. Gloy, 2007. "Estimating delinquency migration and the probability of default from aggregate data," Agricultural Finance Review, Emerald Group Publishing, vol. 67(1), pages 75-85, May.
    10. Calum G. Turvey & Alfons Weersink, 1997. "Credit Risk and the Demand for Agricultural Loans," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 45(3), pages 201-217, November.
    Full references (including those not matched with items on IDEAS)


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

    Cited by:

    1. Luan, D. X. & Bauer, S. & Kuhl, R., 2016. "Income Impacts of Credit on Accessed Households in Rural Vietnam: Do Various Credit Sources Perform Differently?," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 8(1), March.
    2. Li, Changsheng & Lin, Liqiong & Gan, Christopher E.C., 2016. "China credit constraints and rural households’ consumption expenditure," Finance Research Letters, Elsevier, vol. 19(C), pages 158-164.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:afrpps:v:72:y:2012:i:3:p:402-415. 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: (Virginia Chapman). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.