Why Don't Lenders Finance High-Return Technological Change in Developing-Country Agriculture?

Allen Blackman

No 10886, Discussion Papers from Resources for the Future

Abstract: Most of the literature attributes credit constraints in small-farm developing-country agriculture to the variability of returns to investment in this sector. But the literature does not fully explain lenders. reluctance to finance investments in technologies that provide both higher average and less variable returns. To fill this gap, this article develops an information-theoretic credit market model with endogenous technology choice. The model demonstrates that lenders may refuse to finance any investment in a riskless high-return technology--regardless of the interest rate they are offered--when they are imperfectly informed about loan applicants, time preferences and, therefore, about their propensities to default intentionally in order to finance current consumption.

Keywords: Research; and; Development/Tech; Change/Emerging; Technologies (search for similar items in EconPapers)
Pages: 33
Date: 2001
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https://ageconsearch.umn.edu/record/10886/files/dp010017.pdf (application/pdf)

Related works:
Journal Article: Why don't Lenders Finance High-Return Technological Change in Developing-Country Agriculture? (2001)
Working Paper: Why Don't Lenders Finance High-Return Technological Change in Developing-Country Agriculture? (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:rffdps:10886

DOI: 10.22004/ag.econ.10886

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