Direct Elicitation of Credit Constraints: Conceptual and Practical Issues with an Application to Peruvian Agriculture
This article provides a methodological bridge leading from the well-developed theory of credit rationing to the less developed territory of empirically identifying credit constraints. We begin by developing a simple model showing that credit constraints may take three forms: quantity rationing, transaction cost rationing, and risk rationing. Each form adversely affects household resource allocation and thus should be accounted for in empirical analyses of credit market performance. We outline a survey strategy to directly elicit households' status as unconstrained or constrained in the credit market and, if constrained, to further identify which of the three nonprice rationing mechanisms is at play. We discuss several practical issues that arise due to the use of a combination of "factual" and "interpretative" survey questions. Finally, using a farm-level data set from Peru, we illustrate how the methodology can be used to estimate the impacts of credit constraints. (c) 2009 by The University of Chicago. All rights reserved.
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- Frederic Zimmerman & MICHAEL R. CARTER, .
"Asset Smoothing, Consumption Smoothing and the Reproduction for Inequality under Risk and Subsistence Constraints,"
Wisconsin-Madison Agricultural and Applied Economics Staff Papers
402, Wisconsin-Madison Agricultural and Applied Economics Department.
- Zimmerman, Frederick J. & Carter, Michael R., 2003. "Asset smoothing, consumption smoothing and the reproduction of inequality under risk and subsistence constraints," Journal of Development Economics, Elsevier, vol. 71(2), pages 233-260, August.
- Boucher, Stephen R. & Carter, Michael R. & Guirkinger, Catherine, 2008. "AJAE Appendix: Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agriculture Development," American Journal of Agricultural Economics Appendices, Agricultural and Applied Economics Association, vol. 90(2), May.
- Martin Petrick, 2004. "A microeconometric analysis of credit rationing in the Polish farm sector," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 31(1), pages 77-101, March.
- Stephen R. Boucher & Michael R. Carter & Catherine Guirkinger, 2008. "Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agricultural Development," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(2), pages 409-423.
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