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

Allen Blackman

RFF Working Paper Series 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: : agriculture; asymmetric information; credit; developing country; technology adoption. (search for similar items in EconPapers)
JEL-codes: D82 O12 O16 O33 Q14 (search for similar items in EconPapers)
Date: 2001-04-01
New Economics Papers: this item is included in nep-agr and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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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:rff:dpaper:dp-01-17

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