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Safety Net Perception and its Effects on Household Investment in Developing Countries: Chemical Fertilizer Input by Cambodian Farmers


  • Kenjiro Yagura


Farmers in developing countries are reluctant to make investments for fear of failure and the economic distress resulting from this, but the perception of protection by a safety net may induce farmers to invest by reducing that fear. Using Cambodian farm household data, this paper examines factors affecting the perception of protection by a safety net and then assesses the effect of this perception on farmers' investment. For empirical analyses, perceived credit availability from relatives represents this perceived safety net; and chemical fertilizer input signifies the investment size. The results of the econometric analysis demonstrate that farm households with higher economic status, who are able to repay a loan or favour, are more likely to perceive such a safety net. It is also shown that the safety net perception positively affects chemical fertilizer input, implying that farmers accept risk when they perceive a safety net. These findings suggest that it is not only a lack of capital that deters poor households from investment, but also the perceived lack of a safety net.

Suggested Citation

  • Kenjiro Yagura, 2009. "Safety Net Perception and its Effects on Household Investment in Developing Countries: Chemical Fertilizer Input by Cambodian Farmers," Oxford Development Studies, Taylor & Francis Journals, vol. 37(4), pages 363-395.
  • Handle: RePEc:taf:oxdevs:v:37:y:2009:i:4:p:363-395
    DOI: 10.1080/13600810903305216

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    References listed on IDEAS

    1. Jacob Nielsen Arendt & Anders Holm, 2006. "Probit Models with Binary Endogenous Regressors," CAM Working Papers 2006-06, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
    2. Jha, D. (Dayanatha) & Hojjati, Behjat, 1993. "Fertilizer use on smallholder farms in Eastern Province, Zambia:," Research reports 94, International Food Policy Research Institute (IFPRI).
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