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Liquidity Constraints and Postharvest Selling Behavior: Evidence from China's Maize Farmers

Authors

  • Dingqiang Sun,

    1. College of Economics and Management, Nanjing Agricultural University, Nanjing, China
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  • Huanguang Qiu,

    1. School of Agricultural Economics and Rural Development, Renmin University of China, Beijing, China
    2. Center for Chinese Agricultural Policy, Institute of Geographical Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing, China
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  • Junfei Bai,

    Corresponding author
    1. College of Economics and Management, China Agricultural University, Beijing, China
    • Center for Chinese Agricultural Policy, Institute of Geographical Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing, China
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  • Haiyan Liu,

    1. Center for Chinese Agricultural Policy, Institute of Geographical Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing, China
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  • Guanghua Lin,

    1. College of Economics and Management, Nanjing Agricultural University, Nanjing, China
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  • Scott Rozelle

    1. Freeman Spogli Institute for International Studies, Stanford University, Stanford, California, USA
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  • The authors acknowledge the financial support of National Natural Science Foundation of China (71073154; 71173204; 71222302) and China Agricultural Research System, Ministry of Agriculture of China (nycytx-02). We would like to thank Professors Zhiguang Xu, Jikun Huang, Michael Castelhano, and Linke He for their invaluable comments and suggestions on earlier version of this work. We are also grateful to Weiguang Wu, Hengshan Deng, Rui Ma, and Huayong Zhi for their help in collecting the data. Any errors are our responsibility.

Corresponding author: Junfei Bai. Tel: (86)-10-64888979; fax: (86)-10-64856533; email: jfbai.ccap@igsnrr.ac.cn.

Abstract

This paper addresses the impacts of liquidity constraints on household postharvest commodity selling behavior. Using data collected from China's maize farmers, we find that households with debt, in general, sell their maize much earlier than debt-free households, thus potentially losing inter-temporal arbitrage opportunities. Segmenting our sample into wealthy and poor households, we find that the relationship between a liquidity constraint and postharvest sales is apparent only among poor households. Using the occurrence of an illness in children or an elderly household member as an instrument for liquidity, we control for potential endogeneity associated with liquidity. We find that poor households in which there were children or elderly people with sicknesses in previous years are more likely to sell maize early than other poor households.

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