Credit constraints and labour allocation decisions in rural Burkina Faso

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Résumé

Credit is central in labour allocation decisions in smallholder agriculture in developing countries. The purpose of this paper is to analyse the effect of credit constraints on farm households’ labour allocation decisions in rural Burkina Faso. The study used a direct elicitation approach of credit constraints and applied a farm household model to categorize households into four labour market participation regimes. A joint estimation of both the multinomial logit model and probit model was applied on survey data from Burkina Faso to assess the effect of credit constraint on the probability of choosing one of the four alternatives. The results of the probit model showed that households’ endowment of livestock, access to news, and membership to an farmer-based organization were factors lowering the probability of being credit constrained in rural Burkina Faso. The multinomial logit model results showed that credit constraints negatively influenced the likelihood of a farm household to use hired labour in agricultural production and perhaps more importantly it induces farm households to hire out labour off farm. The results also showed that the other components of household characteristics and farm attributes are important factors determining the relative probability of selecting a particular labour market participation regime. Facilitating access to credit in rural Burkina Faso can encourage farm households to use hired labour in agricultural production and thereby positively impacting farm productivity and relieving unemployment pressures.

Mots-clés

Multinomial logit, Probit model, Burkina Faso, Credit constraints, Labour allocation