Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agricultural Development

Stephen R. Boucher, Michael Carter and Catherine Guirkinger ()

American Journal of Agricultural Economics, 2008, vol. 90, issue 2, 409-423

Abstract: We develop a model that shows that asymmetric information can result in two types of credit rationing: conventional quantity rationing, and “risk rationing,” whereby farmers are able to borrow but only under high-collateral contracts that offer them lower expected well-being than a safe, subsistence activity. After exploring its incidence with respect to wealth, we show that risk rationing has important policy implications. Specifically, land titling will be only partially effective because it does not enhance producers' willingness to offer up the collateral needed to secure loans under moral hazard constraints. Efforts to enhance agricultural investment and the working of agricultural credit markets must step beyond land titling and also deal with risk. Copyright 2008, Oxford University Press.

Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (149)

Downloads: (external link)
http://hdl.handle.net/10.1111/j.1467-8276.2007.01116.x (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:90:y:2008:i:2:p:409-423

Access Statistics for this article

American Journal of Agricultural Economics is currently edited by Madhu Khanna, Brian E. Roe, James Vercammen and JunJie Wu

More articles in American Journal of Agricultural Economics from Agricultural and Applied Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().