IDEAS home Printed from https://ideas.repec.org/p/ags/iaae18/277536.html
   My bibliography  Save this paper

Does Formal Credit Constraint Restrain Agricultural Production?

Author

Listed:
  • Wang, J.
  • Bi, S.
  • Lyu, K.
  • Zhang, C.

Abstract

This study adopts econometric models to link the formal credit constraints with agricultural output and short-term investment in rural China. The empirical results show that formal credit constraint does impinge significantly on agricultural production, and credit-constrained farmers mostly depend on family endowment. In case where the formal credit demand is fully met, the average output per mu will increase by 14.6%. According to further analysis, formal credit constraints have a differential impact on short-term agricultural inputs. Demand-side credit constraint restrains the purchase to agricultural machinery service, while supply-side credit constraint has negative effects on fertilizer inputs, but not on seed, pesticide inputs and labor hiring. Acknowledgement : The paper was supported by the Programs of National Natural Science Found of China (NSFC) (71573262), China Agriculture Research System (CARS-02), as well as the Agricultural Science and Technology Innovation Program (ASTIP-IAED-2018-03).

Suggested Citation

  • Wang, J. & Bi, S. & Lyu, K. & Zhang, C., 2018. "Does Formal Credit Constraint Restrain Agricultural Production?," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277536, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae18:277536
    DOI: 10.22004/ag.econ.277536
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/277536/files/1820.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.277536?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Hans Binswanger & Shahidur Khandker, 1995. "The impact of formal finance on the rural economy of India," Journal of Development Studies, Taylor & Francis Journals, vol. 32(2), pages 234-262.
    2. Chandra S. Kumar & Calum G. Turvey & Jaclyn D. Kropp, 2013. "The Impact of Credit Constraints on Farm Households: Survey Results from India and China," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 35(3), pages 508-527.
    3. Gershon Feder & Lawrence J. Lau & Justin Y. Lin & Xiaopeng Luo, 1990. "The Relationship between Credit and Productivity in Chinese Agriculture: A Microeconomic Model of Disequilibrium," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(5), pages 1151-1157.
    4. Catherine Guirkinger & Stephen R. Boucher, 2008. "Credit constraints and productivity in Peruvian agriculture," Agricultural Economics, International Association of Agricultural Economists, vol. 39(3), pages 295-308, November.
    5. Simtowe, Franklin & Zeller, Manfred & Diagne, Aliou, 2009. "The impact of credit constraints on the adoption of hybrid maize in Malawi," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 90(1).
    6. Fengxia Dong & Jing Lu & Allen M. Featherstone, 2012. "Effects of credit constraints on household productivity in rural China," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 72(3), pages 402-415, November.
    7. 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), pages 1-6.
    8. Foltz, Jeremy D., 2004. "Credit market access and profitability in Tunisian agriculture," Agricultural Economics, Blackwell, vol. 30(3), pages 229-240, May.
    9. Kim, Sung-Yong & Nayga, Rodolfo M., Jr. & Capps, Oral, Jr., 2000. "The Effect Of Food Label Use On Nutrient Intakes: An Endogenous Switching Regression Analysis," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(1), pages 1-17, July.
    10. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    11. H.A. Freeman & Simeon K. Ehui & Mohammad A. Jabbar, 1998. "Credit constraints and smallholder dairy production in the East African highlands: application of a switching regression model," Agricultural Economics, International Association of Agricultural Economists, vol. 19(1-2), pages 33-44, September.
    12. Kon, Y & Storey, D J, 2003. "A Theory of Discouraged Borrowers," Small Business Economics, Springer, vol. 21(1), pages 37-49, August.
    13. Deininger, Klaus & Zegarra, Eduardo & Lavadenz, Isabel, 2003. "Determinants and Impacts of Rural Land Market Activity: Evidence from Nicaragua," World Development, Elsevier, vol. 31(8), pages 1385-1404, August.
    14. Awotide, B.A. & Abdoulaye, Tahirou & Alene, Arega & Manyong, Victor M., 2015. "Impact of Access to Credit on Agricultural Productivity: Evidence from Smallholder Cassava Farmers in Nigeria," 2015 Conference, August 9-14, 2015, Milan, Italy 210969, International Association of Agricultural Economists.
    15. Jonathan Morduch, 1995. "Income Smoothing and Consumption Smoothing," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 103-114, Summer.
    16. 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, July.
    17. Conor M. O'Toole & Carol Newman & Thia Hennessy, 2014. "Financing Constraints and Agricultural Investment: Effects of the Irish Financial Crisis," Journal of Agricultural Economics, Wiley Blackwell, vol. 65(1), pages 152-176, January.
    18. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Turvey, C. G., 2017. "IFAD RESEARCH SERIES 10 - Inclusive finance and inclusive rural transformation," IFAD Research Series 280048, International Fund for Agricultural Development (IFAD).
    2. Balana, Bedru & Oyeyemi, Motunrayo, 2021. "Credit Constraints and Adoption of Agricultural Technologies in Developing Countries? Evidence from Nigeria," 2021 Conference, August 17-31, 2021, Virtual 315347, International Association of Agricultural Economists.
    3. Porgo, Mohamed & Kuwornu, John K.M. & Zahonogo, Pam & Jatoe, John Baptist D. & Egyir, Irene S., 2018. "Credit constraints and cropland allocation decisions in rural Burkina Faso," Land Use Policy, Elsevier, vol. 70(C), pages 666-674.
    4. Ayalew Ali, Daniel & Deininger, Klaus, 2012. "Causes and implications of credit rationing in rural Ethiopia : the importance of spatial variation," Policy Research Working Paper Series 6096, The World Bank.
    5. Shee, Apurba & Pervez, Shadayen & Turvey, Calum G., 2018. "Heterogeneous Impacts of Credit Rationing on Agricultural Productivity: Evidence from Kenya," 2018 Annual Meeting, August 5-7, Washington, D.C. 274224, Agricultural and Applied Economics Association.
    6. Jianmei ZHAO & Jun ZHANG & Peter J. BARRY, 2014. "Do formal credit constraints affect the rural household consumption in China?," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 60(10), pages 458-468.
    7. Diana Fletschner & Catherine Guirkinger & Steve Boucher, 2010. "Risk, Credit Constraints and Financial Efficiency in Peruvian Agriculture," Journal of Development Studies, Taylor & Francis Journals, vol. 46(6), pages 981-1002.
    8. Seck, Abdoulaye, 2018. "Heterogeneous Credit Constraints and Smallholder Farming in Senegal," 92nd Annual Conference, April 16-18, 2018, Warwick University, Coventry, UK 273491, Agricultural Economics Society.
    9. Ali, Daniel Ayalew & Deininger, Klaus & Duponchel, Marguerite, 2014. "Credit constraints, agricultural productivity, and rural nonfarm participation : evidence from Rwanda," Policy Research Working Paper Series 6769, The World Bank.
    10. Mukasa Adamon N. & Anthony M. Simpasa & Adeleke Oluwole Salami, 2017. "Working Paper 247 - Credit constraints and farm productivity: Micro-level evidence from smallholder farmers in Ethiopia," Working Paper Series 2356, African Development Bank.
    11. Olomola, Aderbigbe & Gyimah-Brempong, Kwabena, 2014. "Loan demand and rationing among small-scale farmers in Nigeria:," IFPRI discussion papers 1403, International Food Policy Research Institute (IFPRI).
    12. Fadoju, Dorcas Tolulope & Felicia Adesiyan, Oluwafunmilola & Adeomi, Damilola Toluse, 2022. "Credit Constraints in Farm Households in South West Nigeria: Nature and Determinants," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 10(4), October.
    13. Olomola, Aderbigbe, 2014. "Business operations of agrodealers and their participation in the loan market in Nigeria:," IFPRI discussion papers 1400, International Food Policy Research Institute (IFPRI).
    14. Awotide, B.A. & Abdoulaye, Tahirou & Alene, Arega & Manyong, Victor M., 2015. "Impact of Access to Credit on Agricultural Productivity: Evidence from Smallholder Cassava Farmers in Nigeria," 2015 Conference, August 9-14, 2015, Milan, Italy 210969, International Association of Agricultural Economists.
    15. Balana, B. B. & Mekonnen, D. & Haile, B. & Hagos, Fitsum & Yimam, S. & Ringler, C., 2022. "Demand and supply constraints of credit in smallholder farming: evidence from Ethiopia and Tanzania," Papers published in Journals (Open Access), International Water Management Institute, pages 159:106033..
    16. Li, Changsheng & Lin, Liqiong & Gan, Christopher E.C., 2016. "China credit constraints and rural households’ consumption expenditure," Finance Research Letters, Elsevier, vol. 19(C), pages 158-164.
    17. Catherine Guirkinger & Stephen R. Boucher, 2008. "Credit constraints and productivity in Peruvian agriculture," Agricultural Economics, International Association of Agricultural Economists, vol. 39(3), pages 295-308, November.
    18. Temesgen Belissa & Robert Lensink & Anne Winkel, 2020. "Effects of Index Insurance on Demand and Supply of Credit: Evidence from Ethiopia," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(5), pages 1511-1531, October.
    19. Cosimo Magazzino & Marco Mele & Fabio Gaetano Santeramo, 2021. "Using an Artificial Neural Networks Experiment to Assess the Links among Financial Development and Growth in Agriculture," Sustainability, MDPI, vol. 13(5), pages 1-15, March.
    20. Reyes, Alvaro & Lensink, Robert & Kuyvenhoven, Arie & Moll, Henk, 2012. "Impact of Access to Credit on Farm Productivity of Fruit and Vegetable Growers in Chile," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126217, International Association of Agricultural Economists.

    More about this item

    Keywords

    Agricultural Finance;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:iaae18:277536. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/iaaeeea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.