Abstract

RUBEN, Ruerd  and  KOLK, Hubert. Credit use, factor substitution and rural income distribution: a study on maize farmers in occidental Honduras. Inv. Econ [online]. 2005, vol.64, n.251, pp.13-32. ISSN 0185-1667.

Credit is usually considered as an important device for adjusting farmers' resource management and livelihood strategies. Farmers with better access to financial services are supposed to be able to increase their marginal returns to variable production factors like labor and fertilizers. Factor substitution is likely to take place towards more intensive production systems that are better able to guarantee food security and to enhance sustainable land use.

We made a study of maize farmers located in the Occidental department of Lempira in Honduras to analyze the impact of credit use on marginal returns to land, labor and fertilizers subject to the availability of credit. It was found that factor shares of labor and fertilizers substantially increased for farmers using credit, whereas the factor share of land was strongly reduced. The relative position of landowners is subject to deterioration, while the influence of input providers is likely to increase. Given the complementarities between fertilizers and labor, credit could be an important instrument for adjusting rural class relations.

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