Dynamics of Investment for Market-Oriented Farmers in Chile

Using panel data from a survey conducted in 2006 and 2008 of 177 market-oriented farmers in central Chile, we investigate investment under imperfect capital markets. Specifically we determine the impact of formal credit constraints on fixed investment. By controlling for endogeneity problems, we find credit constraints to have a significant negative impact on fixed investment. In addition, a time trend is significant, which we understand as evidence of the impact of the global financial crisis of 2007.