@article{Adams:197325,
      recid = {197325},
      author = {Adams, Dale W. and Gonzalez-Vega, Claudio},
      title = {Interest Rates and Factor-Use Proportions in Agriculture},
      address = {1987},
      number = {992-2016-77615},
      pages = {7},
      year = {1987},
      abstract = {Interest rates on formal agncultural loans m most low  income countries are less than rates of
inflation and below  rates charged on commercial loans. Many development  economists have criticized cheap credit
because they felt  it induced farmers to use too much capital (such as  tractors) at the expense of labour. This
argument is an  extension of neoclassical economics where mterest rates  strongly influence investment dec1s10ns.
Four arguments are  evaluated that might be used to support this hne of thinkmg  under conditions where rural
fmanc1al markets are  fragmented: low interest rates reduce the cost of capital  inputs relative to other inputs, low
interest rates result  m borrowers using discount rates on future benefits from  capital inputs that are also too low,
cheap loans are often  tied to the use of capital mputs, and low mterest rates  cause lenders to concentrate loans m
the hands of producers  who use relatively large amounts of capital mputs. These  supportmg arguments are weak
and that low interest rates  probably have relatively httle impact on farmers' decisions  about factor-use proportions
Low mterest rates have more  in1portant impacts on income distribution, the costs of  financial mtermediation,
fmancial savings, and the vitality  of financial systems.},
      url = {http://ageconsearch.umn.edu/record/197325},
      doi = {https://doi.org/10.22004/ag.econ.197325},
}