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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.

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  • 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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    2. Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 305-346, April.
    3. Mark R. Rosenzweig & Kenneth I. Wolpin, 1985. "Specific Experience, Household Structure, and Intergenerational Transfers: Farm Family Land and Labor Arrangements in Developing Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(Supplemen), pages 961-987.
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    8. Bhalla, Surjit S, 1980. "The Measurement of Permanent Income and Its Application to Savings Behavior," Journal of Political Economy, University of Chicago Press, vol. 88(4), pages 722-744, August.
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