Seasonal Credit Constraints and Agricultural Labor Supply: Evidence from Zambia

44 Pages Posted: 16 Jun 2014

See all articles by Günther Fink

Günther Fink

Harvard University - Department of Population and International Health

B. Kelsey Jack

Tufts University - Department of Economics; National Bureau of Economic Research (NBER)

Felix Masiye

University of Zambia (UNZA) - Department of Economics

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Date Written: June 2014

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.

Suggested Citation

Fink, Günther and Jack, B. Kelsey and Masiye, Felix, Seasonal Credit Constraints and Agricultural Labor Supply: Evidence from Zambia (June 2014). NBER Working Paper No. w20218, Available at SSRN: https://ssrn.com/abstract=2450918

Günther Fink (Contact Author)

Harvard University - Department of Population and International Health ( email )

665 Huntington Avenue
Boston, MA 02115
United States

B. Kelsey Jack

Tufts University - Department of Economics ( email )

Medford, MA 02155
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Felix Masiye

University of Zambia (UNZA) - Department of Economics ( email )

Lusaka
Zambia

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