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Contractual Relations in Agricultural Credit Markets: A Hedonic Pricing Approach with Application to Poland

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  • Martin Petrick
  • Laure Latruffe

Abstract

We present a micro‐econometric analysis of agricultural credit market outcomes in Poland that investigates the relationship between contractual arrangements and interest rates. An innovative theoretical framework based on a hedonic market model is developed. We interpret the factors that influence interest rates as ‘quality’ components of the credit contract. Using unique data allows us to consider both nominal interest rates and additional bank fees. The results show that banks have preferences for particularly liquid types of collateral, whereas they care little about the purpose for which the loan is used. Furthermore, the analysis allows quantification of the effects of socioeconomic attributes of farmers, different lending sources and government subsidies on interest rates. The latter effect is small compared with the officially declared reduction of the nominal interest rate. A simulation shows that enabling more borrowers to use liquid forms of collateral implies lower rates than those obtained by participating in the subsidy programme.

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  • Martin Petrick & Laure Latruffe, 2006. "Contractual Relations in Agricultural Credit Markets: A Hedonic Pricing Approach with Application to Poland," Journal of Agricultural Economics, Wiley Blackwell, vol. 57(1), pages 49-63, March.
    • Handle: RePEc:bla:jageco:v:57:y:2006:i:1:p:49-63
    DOI: 10.1111/j.1477-9552.2006.00031.x
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    1. Petrick, Martin, 2001. "Documentation of the Poland farm survey 2000," IAMO Discussion Papers 36, Leibniz Institute of Agricultural Development in Transition Economies (IAMO).
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    Cited by:

    1. Petrick, Martin & Kloss, Mathias, 2013. "Identifying Factor Productivity from Micro-data: The case of EU agriculture," Working papers 144004, Factor Markets, Centre for European Policy Studies.
    2. Gramzow, Andreas, 2006. "Endogenous Initiatives As A Chance To Improve Rural Livelihood? Results Of A Case Study In Baltow, South-Eastern Poland," IAMO Discussion Papers 14900, Institute of Agricultural Development in Transition Economies (IAMO).
    3. Myyra, Sami & Pietola, Kyosti & Heikkila, Anna-Maija, 2011. "Farm Level Capital: Capital positions, structures, the dynamics of farm level investments, capital accumulation and leverage positions," Working papers 117488, Factor Markets, Centre for European Policy Studies.
    4. Hedman Jansson, Kristina & Huisman, Chelsey Jo & Lagerkvist, Carl Johan & Rabinowicz, Ewa, 2013. "Agricultural Credit Market Institutions: A Comparison of Selected European Countries," Working papers 144003, Factor Markets, Centre for European Policy Studies.
    5. repec:zbw:iamodp:271870 is not listed on IDEAS
    6. Dries, Liesbeth & Swinnen, Johan F.M., 2010. "The impact of interfirm relationships on investment: Evidence from the Polish dairy sector," Food Policy, Elsevier, vol. 35(2), pages 121-129, April.
    7. Waseem AHMAD* & Tanvir AHMED** & Bashir AHMAD***, 2017. "HEDONIC PRICING OF MILK AT RETAIL LEVEL: A Case of Faisalabad, Pakistan," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 27(1), pages 29-39.
    8. Petrick, Martin, 2008. "Theoretical and methodological topics in the institutional economics of European agriculture. With applications to farm organisation and rural credit arrangements," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 45, number 92318.
    9. Gramzow, Andreas, 2006. "Endogenous initiatives as a chance to improve rural livelihood? Results of a case study in Bal­tow, South-Eastern Poland [Tourismus als eine Möglichkeit zur Erhöhung des ländlichen Einkommens? Erge," IAMO Discussion Papers 95, Leibniz Institute of Agricultural Development in Transition Economies (IAMO).
    10. Petrick, Martin & Kloss, Mathias, 2018. "Identifying Agricultural Factor Productivity from Micro-data: A Review of Approaches with an Application to EU Countries," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 67(2), June.

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