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Risk, Credit Constraints and Financial Efficiency in Peruvian Agriculture

  • Diana Fletschner
  • Catherine Guirkinger
  • Steve Boucher

Based on a panel data set, we use a two-stage analysis to evaluate the effects of access to formal credit on financial efficiency of farms in northern Peru. The first stage uses non-parametric data envelope analysis to estimate farm-specific measures of financial efficiency; 28 per cent of farmers are financially inefficient and credit constraints reduce profits of these farmers by an average of between 17 and 27 per cent. The second stage uses Tobit regression to evaluate the determinants of financial inefficiency; the results point to uninsured risk as a key determinant of financial inefficiency and suggest that policies to strengthen agricultural insurance markets would likely pay large dividends in rural Peru.

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Article provided by Taylor & Francis Journals in its journal Journal of Development Studies.

Volume (Year): 46 (2010)
Issue (Month): 6 ()
Pages: 981-1002

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Handle: RePEc:taf:jdevst:v:46:y:2010:i:6:p:981-1002
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  1. Léopold Simar, 2003. "Detecting Outliers in Frontier Models: A Simple Approach," Journal of Productivity Analysis, Springer, vol. 20(3), pages 391-424, November.
  2. Foltz, Jeremy D., 2004. "Credit market access and profitability in Tunisian agriculture," Agricultural Economics, Blackwell, vol. 30(3), pages 229-240, May.
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  7. Carter, Michael R. & Galarza, Francisco & Boucher, Stephen, 2007. "Underwriting area-based yield insurance to crowd-in credit supply and demand," MPRA Paper 24326, University Library of Munich, Germany.
  8. Stephen R. Boucher & Catherine Guirkinger & Carolina Trivelli, 2009. "Direct Elicitation of Credit Constraints: Conceptual and Practical Issues with an Application to Peruvian Agriculture," Economic Development and Cultural Change, University of Chicago Press, vol. 57(4), pages 609-640, 07.
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  15. Simar, Leopold & Wilson, Paul W., 2007. "Estimation and inference in two-stage, semi-parametric models of production processes," Journal of Econometrics, Elsevier, vol. 136(1), pages 31-64, January.
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