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Trapped in Agriculture? Credit Constraints, Investments in Education and Agricultural Employment

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  • Ruxanda Berlinschi

    (1] LICOS – Centre for Institutions and Economic Performance, KU Leuven, Leuven, Belgium[2] Department of Economics, Hogeschool Universiteit Brussel, Brussels, Belgium)

  • Johan Swinnen

    (LICOS – Centre for Institutions and Economic Performance, KU Leuven, Leuven, Belgium)

  • Kristine Van Herck

    (LICOS – Centre for Institutions and Economic Performance, KU Leuven, Leuven, Belgium)

Abstract

The basic neo-classical model implies that agricultural employment responds positively to increases in farm income. This argument is assumed by proponents and critics of agricultural subsidy programs in their discourse in favor of or against government support for farmers. However, empirical evidence on the relationship between agricultural employment and farm income (and subsidies) is mixed, and some studies find evidence that an increase in farm income has a negative impact on agricultural employment. This article proposes a new explanation for this puzzle. When farm income increases, part of the additional income is invested by credit-constrained farmers in their children’s education and educated children are less likely to become farmers themselves. We provide a theoretical model and empirical evidence supporting this argument.

Suggested Citation

  • Ruxanda Berlinschi & Johan Swinnen & Kristine Van Herck, 2014. "Trapped in Agriculture? Credit Constraints, Investments in Education and Agricultural Employment," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 26(4), pages 490-508, September.
    • Handle: RePEc:pal:eurjdr:v:26:y:2014:i:4:p:490-508
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    Citations

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    Cited by:

    1. Agnes Gold & Stefan Gold, 2019. "Drivers of Farm Efficiency and Their Potential for Development in a Changing Agricultural Setting in Kerala, India," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 31(4), pages 855-880, September.
    2. Garrone, Maria & Emmers, Dorien & Olper, Alessandro & Swinnen, Johan, 2019. "Jobs and agricultural policy: Impact of the common agricultural policy on EU agricultural employment," Food Policy, Elsevier, vol. 87(C), pages 1-1.
    3. Edgar E. Twine & Elizaphan J. O. Rao & Isabelle Baltenweck & Amos O. Omore, 2019. "Are Technology Adoption and Collective Action Important in Accessing Credit? Evidence from Milk Producers in Tanzania," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 31(3), pages 388-412, July.
    4. Hyytiä Nina, 2020. "Russian Food Import Ban – Impacts on Rural and Regional Development in Finland," European Countryside, Sciendo, vol. 12(4), pages 506-526, December.
    5. Mengling Zhang & Zhenlin Weng & Zhaojiu Chen & Feng Wu, 2022. "Land Endowment and Parental Educational Investment in Rural China," Sustainability, MDPI, vol. 14(8), pages 1-14, April.
    6. repec:lic:licosd:37015 is not listed on IDEAS
    7. Agnė Žičkienė & Rasa Melnikienė & Mangirdas Morkūnas & Artiom Volkov, 2022. "CAP Direct Payments and Economic Resilience of Agriculture: Impact Assessment," Sustainability, MDPI, vol. 14(17), pages 1-24, August.

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