Rural credit and income distribution in Colombia

An obvious factor is that credit markets may systematically discriminate against small farmers by rationing credit according to solvency criteria instead of expected profitability. Small farms may also have surplus labor which is complementary to the inputs purchased on credit. An offsetting factor is that larger farmers may be better educated and therefore better able to use credit productively. Based on a sample of small farm data for Colombia, this paper describes an attempt to use Cobb-Douglas production functions to measure the marginal productivity of intermediate inputs on farms of different size. Using Chow-type significance tests, it was found that in a majority of the crop-regions examined small farms enjoyed superior productivity in the use of intermediate inputs. An unexplored issue is the link between more credit and choice of input purchases as it was simply assumed here that small farmers bought more intermediate inputs.