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The Impact of Access to Credit on the Adoption of Tobacco in Malawi

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  • Simtowe, Franklin

Abstract

This paper investigates the impact of access to credit on the adoption of burley tobacco among households that differ in their credit constraint status using a Double hurdle model. The data used in the study is from Malawi collected by the International Food Policy Research Institute (IFPRI) in collaboration with the Rural Development Department of Bunda College of Agriculture. Results reveal that while access to credit increases adoption among credit constrained households, it has a limited effect among unconstrained households. Results further show that access to credit does not lead to an immediate increase in the likelihood of adoption for tobacco, but conditional on adoption it enables credit constrained households to allocate more land to tobacco production. Consistent with theory, results for the test for separation of consumption and production decisions indicate that household demographic factors affect demand for labor among credit constrained households while they have no effect among unconstrained households.

Suggested Citation

  • Simtowe, Franklin, 2008. "The Impact of Access to Credit on the Adoption of Tobacco in Malawi," MPRA Paper 7368, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:7368
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    References listed on IDEAS

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    1. Deaton, Angus & Irish, Margaret, 1984. "Statistical models for zero expenditures in household budgets," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 59-80.
    2. Benjamin, Dwayne, 1992. "Household Composition, Labor Markets, and Labor Demand: Testing for Separation in Agricultural Household Models," Econometrica, Econometric Society, vol. 60(2), pages 287-322, March.
    3. Cragg, John G, 1971. "Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods," Econometrica, Econometric Society, vol. 39(5), pages 829-844, September.
    4. Diagne, Aliou & Zeller, Manfred, 2001. "Access to credit and its impact on welfare in Malawi:," Research reports 116, International Food Policy Research Institute (IFPRI).
    5. Murray Smith, 2003. "On dependency in double-hurdle models," Statistical Papers, Springer, vol. 44(4), pages 581-595, October.
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    More about this item

    Keywords

    credit constraints; double-hurdle; tobacco; adoption; Malawi;
    All these keywords.

    JEL classification:

    • D0 - Microeconomics - - General
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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