Does Formal Financial Credit Help to Keep Food Security—Quasi-experimental Evidence from the Reward Policy on Incremental Agricultural Loans in China
This paper employs grain production data from various counties from 2007 to 2016 and utilize the incremental incentive policy for agriculture-related loans that began to be piloted in 2009 as a natural experiment to study the impact of formal financial credit on food security.It shows that,first,the incre-mental incentive policy for agriculture-related loans significantly increases grain production.Specifically,the implementation of the policy can increase the grain output by about 8.04%.The policy also has a sig-nificant positive effect on both the grain-producing and non-grain-producing areas,with a stronger impact observed in the latter.However,with the promotion of industrialization,the effect of the policy will grad-ually weaken.Second,mechanism tests show that the policy contributes to an increase in the balance of agricultural loans,indicating that this policy has to some extent alleviated credit constraints on agricultural production.Third,we also found that the implementation of the financial policies supporting agriculture encourages the establishment of agricultural enterprises and increase the input level of agricultural machin-ery and agricultural labor,but there is no significant impact on the irrigation area.Overall,this paper be-lieves that alleviating the credit constraints in agriculture is crucial measure for ensuring food security.
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