The Importance of Family Farming Credit for Income and ConsumptionDuring the Covid-19 Pandemic: A Counterfactual Analysis with Microdata

Abstract

This study analyzes the impacts of the COVID-19 pandemic on the income and consumption of Brazilian family farmers and investigates the role of rural credit contracting through the National Program for Strengthening Family Farming (PRONAF) in mitigating these impacts. Using a sample of 10,000 individual clients from all Brazilian states between January 2016 and June 2022, totaling 780,000 observations in a balanced panel, a cross-sectional model with data from June 2022 and panel data models with a difference-in-differences approach are estimated. The results indicate that family farmers presented negative differential exposure to the pandemic shock, that is, they suffered a greater relative income decline than the comparison group. Credit contracting under PRONAF during the pandemic, in turn, shows a positive and statistically significant differential effect at 1% on income in all estimated specifications, reversing the exposure penalty of the group. These effects do not extend to consumption, for which the available covariates have low explanatory power. It is concluded that the pandemic had a negative impact on the income of family farmers and that access to credit from the program acted as a mitigator of this impact.