Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 14, 2022 erstellt
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Description:
Extreme poverty continues to persist among smallholder farmers in developing countries. One critical challenge faced by these farmers is that the need for immediate cash often forces them to sell their crops at sub-optimal times, thus hurting their revenue. This paper develops a game-theoretic model to examine how cash constraints influence farmers' selling decisions across the harvest and lean seasons, as well as to analyze the efficacy of government loan programs in improving farmers' revenue. We fully characterize the market equilibrium under the base scenario of no government loan, uncovering the differential impacts of cash constraints on the revenue of farmers with different production quantities. We then examine how a government loan program may counteract these negative impacts. Under a government loan, farmers store some of their production quantities at government warehouses in exchange of immediate cash. We analyze and contrast two types of loan policies, one in which all farmers are eligible to access the loan (defined as a homogeneous loan) and the other in which the loan is only offered to farmers whose production quantity is below a certain threshold (defined as a heterogeneous loan). Our results demonstrate when access to the loan may benefit farmers and when a heterogeneous policy is more desirable. We show that, when designed properly, the loan can simultaneously increase aggregate farmer revenue and generate more equitable revenue distribution among the farmers. Nevertheless, we also highlight conditions under which offering the loan may inadvertently hurt farmers' revenue as compared to the scenario of no loan. Taken together, these results underscore that government loan policy design must carefully account for farmers' strategic response to the policy in order to generate positive societal outcomes. Finally, we use field data of Bengal gram farmers in India to empirically validate our modeling insights and quantify the revenue impact of the loan policies studied