Credit access and sustainable farm investments: A dual perspective on chemical and environmentally friendly inputs

Abstract

This study investigates whether farmers with and without credit access and those with and without adequate credit access behave differently in farm investments. We distinguish between chemical input investments (i.e. chemical fertilizers and pesticides) and environmentally friendly ones (i.e. green pest management and organic fertilizers). We utilize the inverse probability-weighted regression adjustment estimator and multivalued treatment effects model to mitigate the selection bias and estimate first-hand data collected from 946 citrus farmers in China. The results show that access to credit significantly increases farmers’ expenditures on chemical pesticides and green pest management by 12.1% and 47.7%, respectively. However, farmers with and without access to adequate credit appear to differ in farm investments. Specifically, farmers accessing adequate credit spend 19.2% more on chemical pesticides and 42.1% more on green pest management than their counterparts without credit access, and they also spend 47.9% more on chemical pesticides than those accessing inadequate credit. Farmers receiving inadequate credit spend 62.6% more on green pest management but 19.4% less on chemical pesticides than those without credit access. Access to credit, regardless of adequate or inadequate credit, does not significantly affect chemical and organic fertilizer investments.