Empirical evidence of Cambodian small scale rural investment determinants

Abstract

This report is the first comprehensive empirical investigation of the determinants of rural Cambodian household spending on capital goods. Over 700 rural Cambodian households were surveyed to provide primary data on small scale investment spending for this thesis. I use Tobit analysis to examine the influence of financial markets, land tenure arrangements and consumption uncertainty on investment. I find that informal property rights have a significant positive influence and formal title has no effect on investment spending; rural households in Cambodia do not borrow from either formal or informal sources for purchasing capital goods; and income uncertainty, has a statistically significant negative effect on both the probability and amount that a household spends on investment. Overall the results suggest that rural Khmers do not trust, and avoid dealing with outsiders, especially those in power. Rural small scale investment in Cambodia would benefit from village level approaches that provide households with security and credit, and hence the motivation and ability to purchase capital goods.