The effect of financial access on convergence: evidence from the US agricultural sector

We investigate the effect of financial access on convergence in the US agricultural sector. We find that financial access allows states with lower real per-capita agricultural production to catch up faster with those with higher real per-capita agricultural production. Our results are robust to various specifications and in the presence of other factors determinant of dynamics in the agricultural sector, such as the level of unemployment and competition. Therefore, this paper unveils higher opportunity costs of lower financial access in terms of welfare improvement, policy dissemination, and technological spillovers across the states. We recommend the implementations and dissemination of strategiesthat will ensure the availability, to all farmers, of innovations developed in agriculture.