  Improving productivity among farm microenterprises is important, especially
in low-income countries where market imperfections are pervasive and resources
are scarce. Relaxing credit constraints can increase the productivity of
farmers. Using a field experiment involving microenterprises in Bangladesh, we
estimate the impact of access to credit on the overall productivity of rice
farmers, and disentangle the total effect into technological change (frontier
shift) and technical efficiency changes. We find that relative to the baseline
rice output per decimal, access to credit results in, on average, approximately
a 14 percent increase in yield, holding all other inputs constant. After
decomposing the total effect into the frontier shift and efficiency
improvement, we find that, on average, around 11 percent of the increase in
output comes from changes in technology, or frontier shift, while the remaining
3 percent is attributed to improvements in technical efficiency. The efficiency
gain is higher for modern hybrid rice varieties, and almost zero for
traditional rice varieties. Within the treatment group, the effect is greater
among pure tenant and mixed-tenant farm households compared with farmers that
only cultivate their own land.
