A paper co-authored by Diana Fletschner titled "Risk, Credit Constraints and Financial Efficiency in Peruvian Agriculture" was accepted for publication by the Journal of Development Studies. Her co-authors include Catherine Guirkinger of the University of Namur, Belgium, and Steve Boucher of the University of California-Davis. Read the abstract
Abstract
Based on a panel data set of farms, we use a two-stage analysis to evaluate the effects of access to formal credit on financial efficiency of farms in northern Peru. In the first stage, we use non-parametric data envelope analysis to estimate farm-specific measures of financial efficiency. In the second stage we use a Tobit regression framework to evaluate the determinants of financial inefficiency. We find that 28 percent of farmers are financially inefficient, and that credit constraints reduce profits of these farmers by an average of between 17 and 27 percent. The second stage regression results point to uninsured risk as a key determinant of financial inefficiency and suggest that policies to strengthen agricultural insurance markets would likely pay large dividends in rural Peru.
Published on May 27, 2009
