ABSTRACT
Seasonal Credit Constraints and Agricultural Labor Supply:
Evidence from Zambia*
Small-scale farming remains the primary source of income for a majority of the population in
developing countries. While most farmers primarily work on their own fields, off-farm labor is
common among small-scale farmers. A growing literature suggests that off-farm labor is not
the result of optimal labor allocation, but is instead driven by households’ inability to cover
short-term consumption needs with savings or credit. We conduct a field experiment in rural
Zambia to investigate the relationship between credit availability and rural labor supply. We
find that providing households with access to credit during the growing season substantially
alters the allocation of household labor, with households in villages randomly selected for a
loan program selling on average 25 percent less off-farm labor. We also find that increased
credit availability is associated with higher consumption and increases in local farming
wages. Our results suggest that a substantial fraction of rural labor supply is driven by short
term constraints, and that access to credit markets may improve the efficiency of labor
allocation overall.