nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2018‒09‒10
two papers chosen by

  1. Heterogeneous Credit Constraints and Smallholder Farming in Senegal By Seck, Abdoulaye
  2. Learning by Trading By Jha, Saumitra; Shayo, Moses

  1. By: Seck, Abdoulaye
    Abstract: Credit constraints are among key challenges to unlocking the great economic and social potentials of small farm agriculture in sub-Saharan Africa. This research sets out to analyze the extent to which farmers are credit-constrained, the underlying generating mechanisms, and how financial inclusion through the reduction or elimination of credit constraints would benefit smallholders in the specific agro-ecological region of the Senegal River Valley. So far the literature tends to focus on credit applicants when defining access to credit dummy, ignoring in the process the vast majority of farmers who stay out of the market. Instead, the paper recognizes that credit constraints come in different forms to the extent that they translate into market entry barriers at the pre-application stage (ex-ante) or contribute to deteriorate the credit profile at the post-application stage (ex-post). Farm-level data are used, and a model that controls for both endogeneity and farmers’ self-selection into the credit market is developed. The results suggest that credit constraints, mostly originated from high transaction costs and high risk, are harming farmers’ performance, and access to credit leads to increased yields and labor productivity. The extent of the gains depends on the stage at which the constraints manifest themselves, as well as the performance indicator and the reference group. These results suggest various policy options to be considered in order to unlock the economic and social potentials associated with financial inclusion in the farming sector.
    Keywords: Agricultural and Food Policy, Farm Management, International Development
    Date: 2018–04–17
  2. By: Jha, Saumitra (Stanford University); Shayo, Moses (Hebrew University of Jerusalem)
    Abstract: How can we help individuals handle financial decisions in an increasingly complex environment? We explore an easily scalable avenue for improving financial understanding: learning by online trading in stocks. We randomly assign 1345 adults incentives and opportunities to trade stocks for 4-7 weeks, with no additional educational content. The treatment significantly improves financial literacy and attenuates the gender gap in self-assessed financial knowledge. Treated individuals are more likely to subsequently invest in stocks and less likely to seek external advice. The effects strengthen for those exposed to index funds, foreign assets, and rising or more volatile asset prices.
    JEL: G11 J16 O16
    Date: 2018–07

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.