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Getting Institutions 'Right' for Whom: Credit Constraints and the Impact of Property Rights on the Quantity and Compostiton of Investment

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  • MICHAEL R. CARTER
  • Pedro Olinto

Abstract

Property rights reform is typically hypothesized to boost investment through investment demand and credit supply effects. Yet when the credit supply effect is muted, property rights reform would be expected to induce liquidity-constrained farms to reduce investment in movable capital even as they increase investment in attached capital. This expectation is corroborated by econometric analysis of panel data from Paraguay. While all farmers experience a positive investment demand effect, liquidity-constrained producers correspondingly reduce their demand for movable capital. Given an estimated pattern of wealth-biased liquidity constraints, property rights reform will get institutions “right” for only wealthier producers. Copyright 2003, Oxford University Press.
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Suggested Citation

  • MICHAEL R. CARTER & Pedro Olinto, 2000. "Getting Institutions 'Right' for Whom: Credit Constraints and the Impact of Property Rights on the Quantity and Compostiton of Investment," Wisconsin-Madison Agricultural and Applied Economics Staff Papers 433, Wisconsin-Madison Agricultural and Applied Economics Department.
  • Handle: RePEc:wop:wisaes:433
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    File URL: http://www.aae.wisc.edu/www/pub/sps/stpap433.pdf
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    References listed on IDEAS

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    1. Gershon Feder & Tongroj Onchan, 1989. "Land Ownership Security and Farm Investment: Reply," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(1), pages 215-216.
    2. Carter, Michael R., 1988. "Equilibrium credit rationing of small farm agriculture," Journal of Development Economics, Elsevier, vol. 28(1), pages 83-103, February.
    3. Barham, Bradford L. & Boucher, Stephen & Carter, Michael R., 1996. "Credit constraints, credit unions, and small-scale producers in Guatemala," World Development, Elsevier, vol. 24(5), pages 793-806, May.
    4. Gourieroux, Christian & Monfort, Alain, 1993. "Simulation-based inference : A survey with special reference to panel data models," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 5-33, September.
    5. Bo Honore & Ekaterini Kyriazidou & J. L. Powell, 2000. "Estimation of tobit-type models with individual specific effects," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 341-366.
    6. Gershon Feder & Tongroj Onchan, 1987. "Land Ownership Security and Farm Investment in Thailand," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(2), pages 311-320.
    7. Bell, Clive & Srinivasan, T N & Udry, Christopher, 1997. "Rationing, Spillover, and Interlinking in Credit Markets: The Case of Rural Punjab," Oxford Economic Papers, Oxford University Press, vol. 49(4), pages 557-585, October.
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