Investigating Credit Constraint and Its Impact on Decrease in Rice Production in the Northern Provinces of Iran: Application of Indirect Production Function

This study investigates the presence of financial constraint and its possible effect on the level of rice production in Gilan and Mazandaran provinces. To this end, an Indirect Production Function was estimated using 2007 crop year production data. Results support the claim that shortage of financial resources is a limiting factor in all cities in these two provinces such that the available financial resources in Gilan and Mazandaran is 23.01 percent and 21.04 percent, respectively, less than the amount required to finance optimum level of production. This limitation has resulted in a 24.78 percent and 23.22 percent decline in production, respectively in Gilan and Mazandaran, as compared to a non-constraint situation. Given the share of these two provinces in providing the rice product needed in the country, supplying sufficient level of financial resources can play a considerable role in reducing import of this product.