Stephen R. Boucher

Direct Elicitation of Credit Constraints: Conceptual and Practical Issues with an Application to Peruvian Agriculture

This article provides a methodological bridge leading from the well‐developed theory of credit rationing to the less developed territory of empirically identifying credit constraints. We begin by developing a simple model showing that credit constraints may take three forms: quantity rationing, transaction cost rationing, and risk rationing. Each form adversely affects household resource allocation and thus should be accounted for in empirical analyses of credit market performance. We outline a survey strategy to directly elicit households’ status as unconstrained or constrained in the credit market and, if constrained, to further identify which of the three nonprice rationing mechanisms is at play. We discuss several practical issues that arise due to the use of a combination of “factual” and “interpretative” survey questions. Finally, using a farm‐level data set from Peru, we illustrate how the methodology can be used to estimate the impacts of credit constraints.

Subsistence Response to Market Shocks

Microeconomic models posit that transaction costs isolate subsistence producers from output market shocks. We integrate microeconomic models of many heterogeneous households into a general equilibrium model and show that supply on subsistence farms may respond, in apparently perverse ways, to changes in output market prices. Price shocks in markets for staple goods are transmitted to subsistence producers through interactions in factor markets. In the case presented, a decrease in the market price of maize reduces wages and land rents, stimulating maize production by subsistence households; however, real incomes of subsistence households fall.

A Gain with a Drain? Evidence from Rural Mexico on the New Economics of the Brain Drain

Evidence is presented in support of the “brain gain” view that the likelihood of migrating to a destination wherein the returns to human capital (schooling) are high creates incentives to acquire human capital in migrant-sending areas. In Mexico, even though internal migrants are more educated than those who stay behind, the average level of schooling in the migrant-sending villages increases with internal migration. This finding is consistent with the hypothesis that the dynamic investment effects reverse the static, depletion effects of migration on schooling. Households’ access to high-skill internal migration networks significantly increases the likelihood that children will attend school beyond the compulsory level. Access to low-skill internal networks has the opposite effect. By contrast with internal migration, migration from rural Mexico to the U.S. does not select positively on schooling, nor does it significantly influence human capital formation, even though remittances from Mexican migrants in the U.S. far outweigh remittances from internal migrants.

Dynamic Field Experiments in Development Economics: Risk Valuation in Morocco, Kenya and Peru

The effective design and implementation of interventions that reduce vulnerability and poverty require a solid understanding of underlying poverty dynamics and associated behavioral responses. Stochastic and dynamic benefit streams can make it difficult for the poor to learn the value of such interventions to them. We explore how dynamic field experiments can help (i) intended beneficiaries to learn and understand these complicated benefit streams, and (ii) researchers to better understand how the poor respond to risk when faced with nonlinear welfare dynamics. We discuss and analyze dynamic risk valuation experiments in Morocco, Peru, and Kenya.