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Risk, Savings and Farm Household Credit Demand This paper empirically estimates individual household credit demand elasticities based on 897 farm households surveyed in Shaanxi and Gansu provinces in China in October 2009. We used experimental techniques to extract individual household credit demand functions from which we estimated point demand elasticities. From a theoretical point of view we proposed that as interest rates fell the demand for credit increased in elasticity and this appears to hold in our data. We find a range of elasticities with mean point estimates of about -0.6. We find that a large number, nearly 20% of farm households have nearly perfectly inelastic demands for credit but we also find that nearly 20% have elasticities above -0.75 including some 15% that have elasticity greater than -1.0. We find that previous studies that have argued against credit policies because of the low inelasticity of demand does not generally hold. There is much heterogeneity in credit demand and we would argue that a full spectrum of targeted credit policies be used to address differences across farms. |