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Credit Market Constraints, Consumption Smoothing, and the Accumulation of Durable Production Assets in Low-Income Countries: Investment in Bullocks in India

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  • Rosenzweig, Mark R
  • Wolpin, Kenneth I

Abstract

This paper formulates and estimates a finite-horizon, structural dynamic model of agricultural investment behavior that incorporates the major features of low-income agricultural environments: income uncertainty, constraints on borrowing and rental markets, and the use of investment assets to generate income and smooth consumption. The model is fit to longitudinal Indian household data on farm profits, bullock stocks, and pump sets. The estimated structural parameters are used to assess th e effects on the life-cycle accumulation of bullocks, agricultural profits, and welfare associated with complete markets and bullock liquidity and with second-best policies that provide assured sources of income to farmers and weather insurance. Copyright 1993 by University of Chicago Press.

Suggested Citation

  • Rosenzweig, Mark R & Wolpin, Kenneth I, 1993. "Credit Market Constraints, Consumption Smoothing, and the Accumulation of Durable Production Assets in Low-Income Countries: Investment in Bullocks in India," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 223-244, April.
    • Handle: RePEc:ucp:jpolec:v:101:y:1993:i:2:p:223-44
    DOI: 10.1086/261874
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    1. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
    2. Zvi Eckstein & Kenneth I. Wolpin, 1989. "The Specification and Estimation of Dynamic Stochastic Discrete Choice Models: A Survey," Journal of Human Resources, University of Wisconsin Press, vol. 24(4), pages 562-598.
    3. Rosenzweig, Mark R & Stark, Oded, 1989. "Consumption Smoothing, Migration, and Marriage: Evidence from Rural India," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 905-926, August.
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