Estimating the Effects of Credit Constraints on Productivity of Peruvian Agriculture
This paper proposes an estimator for the endogenous switching regression models with fixed effects. The decision to switch from one regime to the other may depend on unobserved factors, which would cause the state, such as being credit constrained, to be endogenous. Our estimator allows for this end...
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MDPI AG
2024-09-01
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| author | Tiemen Woutersen Katherine Hauck Shahidur R. Khandker |
| author_facet | Tiemen Woutersen Katherine Hauck Shahidur R. Khandker |
| author_sort | Tiemen Woutersen |
| collection | DOAJ |
| description | This paper proposes an estimator for the endogenous switching regression models with fixed effects. The decision to switch from one regime to the other may depend on unobserved factors, which would cause the state, such as being credit constrained, to be endogenous. Our estimator allows for this endogenous selection and for conditional heteroscedasticity in the outcome equation. Applying our estimator to a dataset on the productivity in agriculture substantially changes the conclusions compared to earlier analysis of the same dataset. Intuitively, the reason that our estimate of the impact of switching between states is smaller than previously estimated is that we captured the selection issue: switching between being credit constrained and credit unconstrained may be endogenous to farm production. In particular, we find that being credit constant has the substantial effect of reducing yield by 11%, but not the previously estimated very dramatic effect of reducing yield by 26%. |
| format | Article |
| id | doaj-art-8c5411071d5f4e94bc9779379614c7c5 |
| institution | Kabale University |
| issn | 2225-1146 |
| language | English |
| publishDate | 2024-09-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Econometrics |
| spelling | doaj-art-8c5411071d5f4e94bc9779379614c7c52024-12-27T14:22:11ZengMDPI AGEconometrics2225-11462024-09-011242710.3390/econometrics12040027Estimating the Effects of Credit Constraints on Productivity of Peruvian AgricultureTiemen Woutersen0Katherine Hauck1Shahidur R. Khandker2Department of Economics, Eller College of Management, University of Arizona, P.O. Box 210108, Tucson, AZ 85721, USADepartment of Agricultural and Resource Economics, University of California at Davis, Davis, CA 95616, USAWorld Bank Group, 1818 H Street NW, Washington, DC 20433, USAThis paper proposes an estimator for the endogenous switching regression models with fixed effects. The decision to switch from one regime to the other may depend on unobserved factors, which would cause the state, such as being credit constrained, to be endogenous. Our estimator allows for this endogenous selection and for conditional heteroscedasticity in the outcome equation. Applying our estimator to a dataset on the productivity in agriculture substantially changes the conclusions compared to earlier analysis of the same dataset. Intuitively, the reason that our estimate of the impact of switching between states is smaller than previously estimated is that we captured the selection issue: switching between being credit constrained and credit unconstrained may be endogenous to farm production. In particular, we find that being credit constant has the substantial effect of reducing yield by 11%, but not the previously estimated very dramatic effect of reducing yield by 26%.https://www.mdpi.com/2225-1146/12/4/27endogenous switching regression modelscredit constraints |
| spellingShingle | Tiemen Woutersen Katherine Hauck Shahidur R. Khandker Estimating the Effects of Credit Constraints on Productivity of Peruvian Agriculture Econometrics endogenous switching regression models credit constraints |
| title | Estimating the Effects of Credit Constraints on Productivity of Peruvian Agriculture |
| title_full | Estimating the Effects of Credit Constraints on Productivity of Peruvian Agriculture |
| title_fullStr | Estimating the Effects of Credit Constraints on Productivity of Peruvian Agriculture |
| title_full_unstemmed | Estimating the Effects of Credit Constraints on Productivity of Peruvian Agriculture |
| title_short | Estimating the Effects of Credit Constraints on Productivity of Peruvian Agriculture |
| title_sort | estimating the effects of credit constraints on productivity of peruvian agriculture |
| topic | endogenous switching regression models credit constraints |
| url | https://www.mdpi.com/2225-1146/12/4/27 |
| work_keys_str_mv | AT tiemenwoutersen estimatingtheeffectsofcreditconstraintsonproductivityofperuvianagriculture AT katherinehauck estimatingtheeffectsofcreditconstraintsonproductivityofperuvianagriculture AT shahidurrkhandker estimatingtheeffectsofcreditconstraintsonproductivityofperuvianagriculture |