Credit Constraints: Their Existence, Determinants, and Implications for US Farm and Nonfarm Sole Proprietorships

The objective of this study is to determine the effect of credit constraints on production for farm and nonfarm sole proprietorships. A propensity score-matching estimator is employed to provide unbiased estimates of the production impacts of being denied credit. The empirical results demonstrate that the value of production is significantly lower for credit-constrained sole proprietorships. If this drop in the value of production is aggregated to a national level, it constitutes only 3% and 13% of total value of production for farm and nonfarm sole proprietorships, respectively.