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The Cost Effects of Government‐Subsidised Credit: Evidence from Farmers’ Credit Unions in Taiwan

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  • Hung‐Jen Wang
  • Ching‐Cheng Chang
  • Po‐Chi Chen

Abstract

We investigate government‐subsidised credit effects on participating financial institutions’ performance in terms of cost efficiency. Using farmers’ credit unions in Taiwan as an example, we find that credit unions’ cost inefficiency is positively correlated with the extent of involvement in subsidy programmes. The results are robust to the control of local competition and labour quality. In addition to the stochastic frontier models from which we obtain the main results, we also propose a new distribution‐free estimation method based on quantile regressions. Results of this study point out that, when evaluating the social costs of the credit programmes, it is important to take into account the efficiency loss generated among financial intermediaries by credit subsidy programmes.

Suggested Citation

  • Hung‐Jen Wang & Ching‐Cheng Chang & Po‐Chi Chen, 2008. "The Cost Effects of Government‐Subsidised Credit: Evidence from Farmers’ Credit Unions in Taiwan," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(1), pages 132-149, February.
    • Handle: RePEc:bla:jageco:v:59:y:2008:i:1:p:132-149
    DOI: 10.1111/j.1477-9552.2007.00137.x
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    Cited by:

    1. Sarah Sanya & Mr. Montfort Mlachila, 2010. "Post-Crisis Bank Behavior: Lessons From Mercosur," IMF Working Papers 2010/001, International Monetary Fund.
    2. repec:zbw:bofitp:2012_005 is not listed on IDEAS
    3. Herrala, Risto & Yandong, Jia, 2012. "Has the Chinese growth model changed? : A view from the credit market," BOFIT Discussion Papers 5/2012, Bank of Finland, Institute for Economies in Transition.
    4. Mototsugu Fukushige & Yingxin Shi, 2022. "Quantile regression approach for measuring production inefficiency with empirical application to the primary production sector for the Xinjiang Production and Construction Corps in China," Asia-Pacific Journal of Regional Science, Springer, vol. 6(2), pages 777-805, June.
    5. Saulo Cardoso Maia & Gideon Carvalho Benedicto & José Willer Prado & David Alastair Robb & Oscar Neto Almeida Bispo & Mozar José Brito, 2019. "Mapping the literature on credit unions: a bibliometric investigation grounded in Scopus and Web of Science," Scientometrics, Springer;Akadémiai Kiadó, vol. 120(3), pages 929-960, September.
    6. Hou, Xiaohui & Li, Shuo & Guo, Pin & Wang, Qing, 2018. "The cost effects of shadow banking activities and political intervention: Evidence from the banking sector in China," International Review of Economics & Finance, Elsevier, vol. 57(C), pages 307-318.

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