Simulating the Impacts of Credit Policy and Fertilizer Subsidy on Central Luzon Rice Farms, the Philippines

Mark W. Rosegrant and Robert W. Herdt

American Journal of Agricultural Economics, 1981, vol. 63, issue 4, 655-665

Abstract: The effects of credit policy and fertilizer subsidy on farmers' input choices, production, and income are examined with a multiseason decision-making model. Stochastic production technology, risk-neutral and risk-averse decision rules, short-term savings/consumption behavior, and a dual financial market are considered. Results indicate the risk-neutral rule is more consistent with actual choices than risk-averse rules. Estimated yields increased 21% to 30% from joint credit and fertilizer subsidies. Benefits are greater on irrigated than on rainfed farms. A substantial default rate in the institutional market reduces credit program benefits.

Date: 1981
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