Analysis of Credit Access, U.S. Agricultural Productivity, and Residual Returns to Resources

Abstract

AbstractWe examine the relationship credit access has had with the U.S. agricultural productivity and residual returns to resources. Our theoretical analysis suggests that limited credit access can be sufficient to prevent a representative farmer from maximizing both short- and long-run profits. Empirical results show that increased credit access is positively associated with both productivity and residual returns to resources. Our findings imply that one way to stimulate the U.S. agricultural productivity growth is to increase credit access. They also provide strong empirical support for the productivity-stimulating value of programs such as the Farm Service Agency’s Farm Loan Program.