Savings, Credit and the Self-finance of Crop Production in Mexico

Publication Date: 2000
Published by: Giordano Dell'Amore Foundation
Document Type: Journal Article

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What is the relationship between savings rates and crop finance?

This Document shows a two-season household model to illustrate how crop input expenditures and demand for credit are altered by changes in the return to savings under various financial market assumptions. In the model, households use savings and credit to smooth consumption given anticipated seasonal fluctuations in income and expenditures.

The impact of the savings rate on household behavior is shown to depend on how crops are financed, whether the household self-finances or borrows, and on whether or not the household is credit constrained.

The model illustrates an important link between savings instruments and agricultural production for poor households and suggests several avenues for policy innovation.

[Publisher's abstract]

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