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st: RE: re: estimation of effect of participation in credit programme on farm production

From   "Maarten Buis" <>
To   <>
Subject   st: RE: re: estimation of effect of participation in credit programme on farm production
Date   Tue, 20 Feb 2007 22:55:19 +0100

--- george owuor wrote:
> I am interested to evaluate effect of a credit programme on 
> farm production besides other factors of production such as 
> fertiliser. My data have participants and non-participants. 
> How would I go about this knowing well that credit influence 
> output via purchased factors such as fertiliser, hired 
> labour.

This is actually quit simple assuming that you will use 
-regress- in order to estimate these effects. Lets say your 
dataset consists of 4 variables, called production, credit, 
labour, and fertiliser. You are assuming that credit has both 
a direct effect on production, and an indirect effect through 
credit and fertiliser. You can get the direct effect by typing:

regress production credit labour fertiliser

You claimed you wanted to know the effect of credit while 
controlling for fertiliser and labour (the direct effect). In this 
case this is probably the most uninteresting effect. How would 
participating in a credit program influence production other then 
by allowing people to buy means to increase production, like 
fertiliser and labour? The direct effect is a sort of residual: the 
effect of participating that cannot be explained by any of the 
variables in the model. Residuals are important in guiding future 
research or give clues on how to improve our model, but are not 
really of substantive interest. This is not always true. Looking at 
direct effects does make sense in cases where one does expect a direct 
effect and is theoretically interested in that effect. I think this is 
not the case here, since I don't see any reason to expect a direct 
effect of participating in a credit program on production. In your case 
I would be more interested in the indirect and total effects. For more
on those see: .

Hope this helps,

Maarten L. Buis
Department of Social Research Methodology 
Vrije Universiteit Amsterdam 
Boelelaan 1081 
1081 HV Amsterdam 
The Netherlands

visiting address:
Buitenveldertselaan 3 (Metropolitan), room Z434 

+31 20 5986715

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