Effect Of Credit Constraints Research Articles

Access to Credit and the Effect of Credit Constraints on Costa Rican Manufacturing Firms

This paper examines the finances and the effect of credit limitations on the behavior and performance of firms in Costa Rica. The study is based on a survey of manufacturing firms conducted by the authors during 2001. The paper characterizes the profile firms’ finances, examines the determinants of firms’ access to banking credit and tries to assess the effect of credit constraints on the behavior and performance of firms.

Credit Constraints, Health Care Choices and Health Outcomes

The principal objective of this paper is to investigate the effect of credit constraints on health care utilizations and health outcomes. This issue has important policy implications, particularly in the rural areas of developing countries, where access to health insurance is very limited. Bosnia- Herzegovina Living Standard Measurement Study Survey 2001 data has been used. Appropriate care has been taken to address the issues of endogeneity of borrowing constraint and the decision process involved in health care utilizations. Using Two Stage Least Square (2SLS) Method and Propensity Score Method, broadly it is inferred that credit constraint is negatively associated (also causality) with health care utilizations and health status.

The Effect of Credit Constraints on the College Drop-Out Decision: A Direct Approach Using a New Panel Study

A serious difficulty in determining the importance of credit constraints in education arises because standard data sources do not provide a direct way of identifying which students are credit constrained. This paper differentiates itself from previous work by taking a direct approach, made possible by unique longitudinal data from the Berea Panel Study. The results from our study of Berea College students suggest that, while credit constraints likely play an important role in the drop-out decisions of some students, the large majority of attrition of students from low-income families should be primarily attributed to reasons other than credit constraints. (JEL I21, I22)

Effect Of Credit Constraint On Production Efficiency Of Farm Households In Southeastern Ethiopia

Credit constraint in agriculture affects not only the purchasing power of producers to procure farm inputs and to cover operating costs in the short run, but also their capacity to make farm-related investments as well as risk behavior in technology choice and adoption. These, in turn, influence technical efficiencies of the farmers. Although credit constraint problem has been recognized in economics literature, especially in those dealing with developing countries, little emphasis has been given to its effect on productive efficiency of farmers. In light of this, explicitly considering credit constraint, this paper estimated technical efficiency of credit-constrained (CCFHs) and unconstrained farm households (CUFHs) by employing a stochastic frontier technique on farm household survey data from Southeastern Ethiopia. The CCFHs had mean technical efficiency score of 12% less than that of the CUFHs. Given the largest proportion of CCFHs in Ethiopian farming population, this gap implies considerable potential loss in output due to inefficient production. Improving technical efficiency of all farm households in general but more of particularly the CCFHs is desirable. Additional sources of inefficiency differential between the two groups were also identified, and education level of household heads, land fragmentation and loan size significantly affected technical efficiencies of both groups. Besides, wealth and experience affected the CCFHs, and household size affected the CUFHs. In general, the results have important implications for credit, education and land policies in developing countries.Keywords: Credit market, stochastic frontier, technical efficiency, smallholders Ethiopian Journal of Economics Vol. 15 (1) 2006: pp. 1-34

INTRODUCTION TO A STUDY OF INTRAHOUSEHOLD RESOURCE ALLOCATION AND GENDER DISCRIMINATION IN RURAL ANDHRA PRADESH, INDIA

In this special issue, we use unique household data which was collected exclusively for our study in Andhra Pradesh, India, with the help of an NGO. We estimate and test the intrahousehold resource allocation rules, incidence of child labor, and the effects of credit constraints on time allocation among household members. Three empirical papers of this issue indicate the overall support for the collective model against the unitary model of households, clarified the role of household structure, and show the nature of mother-child labor substitution under a binding credit constraint. In addition, a survey paper discussing the recent trends on educational attainment and the empirical strategies in identifyng the policy effects are included.

ON THE MOTHER AND CHILD LABOR NEXUS UNDER CREDIT CONSTRAINTS: FINDINGS FROM RURAL INDIA

There is an emerging consensus that lack of credit is a major cause of child labor and inequality in the intrahousehold distribution of resources. At the same time, patterns in how children spend their time appear to be strongly influenced by maternal employment decisions. This paper includes an assessment of the effect of credit constraints on maternal employment and that of maternal employment on the intrahousehold allocation of labor, a nexus which has been left unexplored by existing studies. Three findings emerge: (1) a mother is more likely to work outside when a household lacks resources, and her domestic labor can be easily replaced by other members, (2) credit market accessibility is one of the major determinants of maternal labor, and (3) elder daughters assume a large part of the burden of maternal employment by providing domestic labor. Under binding credit constraints, results of this study support the collective as opposed to the unitary model of households.

Skill Acquisition, Credit Constraints, and Trade

This paper looks at the effect of credit constraints on skill acquisition when agents have heterogeneous abilities and wealth. We use a two factor general equilibrium model and assume credit markets are absent. We explore the effects of trade on factor earnings as well as the evolution of the distribution of income in small and large economies. Our work suggests that developed countries need to ensure access to education when liberalizing trade to ensure they reap the potential gains from trade.

On the negative relationship between labor income uncertainty and homeownership: Risk-aversion vs. credit constraints

In this paper, we test for the first time whether the driving force behind the negative impact of labor income uncertainty on owner-occupancy propensities is risk-aversion or credit constraints. To disentangle this puzzle, we estimate reduced form equations using Italian data. Our results concerning the effect of credit constraints and income uncertainty are consistent with previous empirical evidence in the US, and confirm that in Italy both variables exert a significant negative effect on the probability of homeownership. However, our main findings indicate that the negative relationship between labor income uncertainty and homeownership is driven by households’ risk-aversion.