Presentation Title
Seasonal liquidity, rural labor markets, and agricultural production: Evidence from Zambia
Organization
Tufts University
Start Date
09-26-2017
Start Time
12:00
End Time
1:00
Location
Monroe Hall, Room 120
Details

Jointly organized by faculty in Politics, Economics, and the Batten School.

Abstract

Access to formal credit remains limited in many rural areas, where incomes are highly seasonal and follow agricultural cropping cycles. We develop a model to show that frictions in capital market access distort labor markets, driving up income and consumption inequality and lowering aggregate output. To identify the causal impact of intra-season credit availability on rural markets, we conducted a two-year randomized controlled trial with small scale farmers in rural Zambia. We show that lowering the cost of borrowing at the time of the year when farmers are most constrained (the lean season) results in a reallocation of labor from better-off to worse-off farms. This reallocation of labor reduces differences in the marginal product of labor across farms, increases local wages, and leads to modest increases in agricultural output.