The investment decisions of small-scale farmers in developing countries are conditioned by their financial environment …. Binding credit market constraints and incomplete insurance can reduce investment in activities with high expected profits. We … leads to significantly larger agricultural investment and riskier production choices in agriculture. The salient constraint …

, thus showing that liquidity constraints bind with respect to agricultural investment. In loan-villages, we gave grants to a … grants. Thus we find important heterogeneity in returns to investment and strong evidence that farmers with higher marginal … returns to investment self-select into lending programs. …