Access to credit and scale efficiency: Evidence from family farms in East China

Rong Cai, Jie Ma, Shujuan Wang and Shukai Cai

Economic Analysis and Policy, 2024, vol. 84, issue C, 1538-1551

Abstract: Productivity improvement is an important driving force for developing countries to accelerate the development of agricultural sectors and promote the transformation of economic structures. However, few studies have focused on the impact of credit access on family farms’ scale efficiency, a contributor to productivity changes. We address this gap by using data collected from a survey of 565 family farms in East China. The stochastic frontier input distance function (SFIDF) is utilized to measure the scale efficiency, and the endogenous switching regression model (ESRM) is employed to estimate average treatment effect (ATT) and address the selection bias. The empirical results show that the average scale efficiency is 0.768, with credit users and non-users averaging 0.802 and 0.737, respectively. Most family farms operate below their optimal production scale, and only about 14.5 % of family farms exceed this optimal scale. Access to credit has significantly improved the scale efficiency of family farms and has not contributed to the excessive pursuit of scale expansion for financial subsidies. These findings are validated by robustness checks. The conclusions of our study have important implications for developing countries seeking to increase financial support for agricultural development.

Keywords: Access to credit; Scale efficiency; Stochastic frontier input distance function; Endogenous switching regression; Family farms (search for similar items in EconPapers)
JEL-codes: D13 Q14 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:84:y:2024:i:c:p:1538-1551

DOI: 10.1016/j.eap.2024.10.021

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