The Deadly Cost of Informal Lending: An Economic Model of Agrarian Suicide in Punjab

Abstract

The Indian state of Punjab, which initially benefited greatly from the Green Revolution, has suffered from a dramatic rise in agrarian suicides for several decades. We use a carefully constructed sample of over one thousand farmers in the epicenter, and build a three-stage model of agricultural production decisions across multiple input and multiple output choices, indebtedness from multiple sources, and suicide via an IPWRA (inverse probability weighted regression adjustment) treatment model to trace the potential roots of the situation. Results show that the use of informal credit from commission agents by farmers accounts for ten percentage points (or twenty percent) of all suicides in our sample, regardless of other household factors and choices.