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Short- and Long-Run Credit Constraints in French Agriculture: A Directional Distance Function Framework Using Expenditure-Constrained Profit Functions

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Author Info
Stéphane Blancard
Jean-Philippe Boussemart
Walter Briec
Kristiaan Kerstens

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Abstract

This empirical application investigates the eventual presence of credit constraints using a panel of French farmers. The credit-constrained profit maximization model proposed by Färe, Grosskopf, and Lee is extended in three ways. First, we rephrase the model in terms of directional distance functions to allow duality with the profit function. Second, we model credit constraints in the short-run and investment constraints in the long-run using short- and long-run profit functions. Third, we lag the expenditure constraint one year to account for the separation between planning and production. We find empirical evidence of credit and investment constraints. Financially unconstrained farmers are larger, perform better, and seem to benefit from a virtuous circle where access to financial markets allows better productive choices. Copyright 2006 American Agricultural Economics Association.

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Article provided by American Agricultural Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 88 (2006)
Issue (Month): 2 (05)
Pages: 351-364
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Handle: RePEc:bla:ajagec:v:88:y:2006:i:2:p:351-364

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. de Meza, David & Webb, David C, 1987. "Too Much Investment: A Problem of Asymmetric Information," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 281-92, May. [Downloadable!] (restricted)
  2. Petrick, Martin, 2003. "Empirical Measurement Of Credit Rationing In Agriculture: A Methodological Survey," IAMO Discussion Papers 14926, Institute of Agricultural Development in Central and Eastern Europe (IAMO). [Downloadable!]
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  3. Barry, Peter J. & Robison, Lindon J., 2001. "Agricultural finance: Credit, credit constraints, and consequences," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 10, pages 513-571 Elsevier. [Downloadable!] (restricted)
  4. Chavas, Jean-Paul, 2001. "Structural change in agricultural production: Economics, technology and policy," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 5, pages 263-285 Elsevier. [Downloadable!] (restricted)
  5. Fuss, Melvyn & McFadden, Daniel & Mundlak, Yair, 1978. "A Survey of Functional Forms in the Economic Analysis of Production," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 1, chapter 4 McMaster University Archive for the History of Economic Thought. [Downloadable!]
  6. Ralph Bierlen & Allen M. Featherstone, 1998. "FUNDAMENTAL q, CASH FLOW, AND INVESTMENT: EVIDENCE FROM FARM PANEL DATA," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 427-435, August. [Downloadable!] (restricted)
  7. Benjamin, Catherine & Phimister, Euan, 2002. " Does Capital Market Structure Affect Farm Investment? A Comparison Using French and British Farm-Level Panel Data," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 84(4), pages 1115-29, November. [Downloadable!] (restricted)
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  1. Pavel Ciaian & Tomáš Ratinger, 2009. "Income Distribution Effects of EU Rural Development Policies: The Case of Farm Investment Support," EERI Research Paper Series EERI_RP_2009_01, Economics and Econometrics Research Institute (EERI). [Downloadable!]
  2. Jan Fałkowski & Pavel Ciaian & d'Artis Kancs, 2009. "Access to Credit, Factor Allocation and Farm Productivity: Evidence From the CEE Transition Economies," Working Papers 2009-12, Faculty of Economic Sciences, University of Warsaw. [Downloadable!]
  3. Blancard, S. & Boussemart, J.P. & Briec, W. & Kerstens, K., 2008. "Technology Adoption in French Agriculture and the Role of Financial Constraints," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44160, European Association of Agricultural Economists. [Downloadable!]
  4. GIRANTE, Maria Joana & GOODWIN, Barry K. & FEATHERSTONE, Allen, 2008. "Farmers' Crop Acreage Decisions in the Presence of Credit Constraints: Do Decoupled Payments Matter?," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6335, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  5. Stéphane Blancard, 2006. "Financial Exposure and Productive Performance in French Arable Farms," Economics Bulletin, Economics Bulletin, vol. 4(15), pages 1-9. [Downloadable!]
  6. Pavel Ciaian & d'Artis Kancs, 2008. "The Impact of Food Price Shock on Heterogenous Credit Constrained Firms," EERI Research Paper Series EERI_RP_2008_02, Economics and Econometrics Research Institute (EERI). [Downloadable!]
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