Impact of increasing the supply of rural finance on agricultural total factor productivity: Evidence from China

We examine the impact of increasing the supply of rural finance on agricultural total factor productivity through the village banking program in China. Using county-level panel data spanning from 2000 to 2016, we apply the staggered difference-in-differences model and find a significant improvement in agricultural total factor productivity associated with the village banking program. Further mechanism analysis shows that the village banking program contributes to the improvement in agricultural total factor productivity by facilitating the migration of rural labor to urban areas and agricultural mechanization. Moreover, this effect is more pronounced in western, northern and low-income counties. This study shows that increasing the supply of rural finance can increase agricultural productivity.