The US farm credit system and agricultural development: Evidence from an early expansion, 1920–1940

I explore the impact of the Production Credit Associations (PCAs), an arm of the early Farm Credit System, on agricultural yield and input use following the farm crisis of the 1920s. Like many low- and middle-income countries today, farmers in the early 20th century United States found it difficult to access credit. The PCAs were established in 1933 and significantly increased the supply of short-term credit available to farmers. Using distance from the serving PCA as a proxy for credit access, I find that counties within 30 km of a PCA had 7% to 14% higher crop revenue per acre and 9% higher corn yields than counties more than 60 km from a PCA. These areas also had a small but statistically significant increase in the use of tractors (1% to 2%). These results provide crucial evidence of the impact of government-sponsored enterprises on the early US agricultural economy and its use as a cost-effective tool to address market frictions.