Village and Development

Village and Development

Assessing the Impact of Credit Constraints on Potato Production in the Villages of Kaboudarahang County

Document Type : Original Article

Authors
M. Kashefi 1
Gh. Dashti 2
M. Ghahremanzadeh 2
1 M.Sc. Student of Agricultural Economics, University of Tabriz, Tabriz, Iran.
2 Professor, Department of Agricultural Economics, University of Tabriz, Tabriz, Iran.
10.30490/rvt.2026.367576.1721
Abstract
Abstract
Introduction
Sustainable agriculture is fundamental to food security and economic growth. However, developing countries like Iran face structural obstacles, including financial constraints, in their transition to modern agriculture. These constraints challenge the achievement of optimal production. This study specifically investigates the impact of these budgetary constraints on the production of a strategic crop, potatoes, in the villages of Kabudarahang county, one of the main hubs for this product.
Materials and Methods
This research utilized the indirect production function framework and the translog functional form to analyze budget constraints. The necessary data were collected through questionnaires and in-person interviews with 154 potato farmers in the villages of Kabudarahang County during the 2022-2023 cropping season. Variables examined included potato yield, prices of main inputs (chemical fertilizers, seeds, pesticides, and water), and the farmers' available budget. The λ was used to identify the presence of a budget constraint, with values greater than one indicating its existence. Additionally, input demand functions and returns to scale were estimated.
Results and Discussion
The study results indicate that budget constraints have had a significant impact on potato production. Estimates confirm the existence of effective budget constraints for over 90% of farmers (with a Lagrange multiplier of 1.38). This constraint led to a 31.7% credit shortage and a 28.9% reduction in production compared to the optimal level. Furthermore, the elasticity of production with respect to input prices was negative, with the highest sensitivity related to chemical fertilizers (-0.38), which also had the largest share of costs (0.44). The average return to scale (0.85) shows decreasing returns, likely stemming from these financial limitations.
Conclusion
The results of this study indicate that budget limitations have been the primary factor in the decrease of potato production in Kabudarahang County, hindering farmers' access to essential inputs such as fertilizer. To address this challenge, it is suggested that appropriate credit facilities, a guaranteed product purchase system, and resource management training be prioritized. This would alleviate financial constraints, enabling increased production and leading to food security and sustainable economic growth in the villages of Kabudarahang County.
Keywords
Credit Constraint
Indirect Production Function
Potato
Kaboudarahang County
Returns to Scale
Subjects
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