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Seasonal Credit Constraints and Agricultural Labor Supply: Evidence from Zambia

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  • Günther Fink
  • B. Kelsey Jack
  • Felix Masiye

Abstract

Small-scale farming remains the primary source of income for a majority of the population in developing countries. While most farmers primarily work on their own fields, off-farm labor is common among small-scale farmers. A growing literature suggests that off-farm labor is not the result of optimal labor allocation, but is instead driven by households' inability to cover short-term consumption needs with savings or credit. We conduct a field experiment in rural Zambia to investigate the relationship between credit availability and rural labor supply. We find that providing households with access to credit during the growing season substantially alters the allocation of household labor, with households in villages randomly selected for a loan program selling on average 25 percent less off-farm labor. We also find that increased credit availability is associated with higher consumption and increases in local farming wages. Our results suggest that a substantial fraction of rural labor supply is driven by short-term constraints, and that access to credit markets may improve the efficiency of labor allocation overall.

Suggested Citation

  • Günther Fink & B. Kelsey Jack & Felix Masiye, 2014. "Seasonal Credit Constraints and Agricultural Labor Supply: Evidence from Zambia," NBER Working Papers 20218, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20218
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    1. repec:ebl:ecbull:eb-17-00584 is not listed on IDEAS
    2. repec:eee:deveco:v:131:y:2018:i:c:p:42-61 is not listed on IDEAS
    3. B. Kelsey Jack & Paulina Oliva & Christopher Severen & Elizabeth Walker & Samuel Bell, 2015. "Technology Adoption Under Uncertainty: Take-Up and Subsequent Investment in Zambia," NBER Working Papers 21414, National Bureau of Economic Research, Inc.
    4. Kusunose, Yoko & Tembo, Solomon & Mason, Nicole M., 2015. "Do crop income shocks widen disparities in smallholder agricultural investments? Panel survey evidence from Zambia," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205555, Agricultural and Applied Economics Association.
    5. Günther Fink & B. Kelsey Jack & Felix Masiye, 2018. "Seasonal Liquidity, Rural Labor Markets and Agricultural Production," NBER Working Papers 24564, National Bureau of Economic Research, Inc.
    6. Fink, Günther & Masiye, Felix, 2015. "Health and agricultural productivity: Evidence from Zambia," Journal of Health Economics, Elsevier, vol. 42(C), pages 151-164.
    7. Van Hoyweghen, Kaat & Van Den Broek, Goedele & Maertens, Miet, 2018. "Understanding the importance of wage employment for rural development: Evidence from Senegal," Working Papers 272323, Katholieke Universiteit Leuven, Centre for Agricultural and Food Economics.
    8. Jacopo, Bonan & Stefano, Pareglio & Valentina, Rotondi, 2015. "Extension Services, Production and Welfare: Evidence from a Field Experiment in Ethiopia," Working Papers 312, University of Milano-Bicocca, Department of Economics, revised 30 Oct 2015.
    9. Basu, Karna & Wong, Maisy, 2015. "Evaluating seasonal food storage and credit programs in east Indonesia," Journal of Development Economics, Elsevier, vol. 115(C), pages 200-216.
    10. Supreet Kaur, 2014. "Nominal Wage Rigidity in Village Labor Markets," NBER Working Papers 20770, National Bureau of Economic Research, Inc.
    11. Tristan Le Cotty & Elodie Maitre d'Hotel & Raphael Soubeyran & Julie Subervie, 2018. "Inventory credit as a commitment device to save grain until the hunger season," CEE-M Working Papers 18-12, CEE-M, Universitiy of Montpellier, CNRS, INRA, Montpellier SupAgro.

    More about this item

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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