Seasonal Credit Constraints and Agricultural Labor Supply: Evidence from Zambia

Günther Fink, B. Kelsey Jack and Felix Masiye ()
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Felix Masiye: University of Zambia

No 8657, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Small-scale farming remains the primary source of income for a majority of the population in developing countries. While most farmers primarily work on their own fields, off-farm labor is common among small-scale farmers. A growing literature suggests that off-farm labor is not the result of optimal labor allocation, but is instead driven by households' inability to cover short-term consumption needs with savings or credit. We conduct a field experiment in rural Zambia to investigate the relationship between credit availability and rural labor supply. We find that providing households with access to credit during the growing season substantially alters the allocation of household labor, with households in villages randomly selected for a loan program selling on average 25 percent less off-farm labor. We also find that increased credit availability is associated with higher consumption and increases in local farming wages. Our results suggest that a substantial fraction of rural labor supply is driven by short-term constraints, and that access to credit markets may improve the efficiency of labor allocation overall.

Keywords: agriculture; credit; seasonality; income smoothing (search for similar items in EconPapers)
JEL-codes: J43 O13 O16 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2014-11
New Economics Papers: this item is included in nep-afr, nep-agr, nep-dev, nep-exp and nep-mfd
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Citations: View citations in EconPapers (42)

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Working Paper: Seasonal Credit Constraints and Agricultural Labor Supply: Evidence from Zambia (2014)
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