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The Impact of Food Price Shock on Heterogenous Credit Constrained Firms

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  • Ciaian, Pavel
  • Kancs, d'Artis

Abstract

The paper analyses how the rising agricultural prices affect heterogenous farm access to inputs and production under credit market imperfections in the CEE transition countries. Using farm level panel data which contains 37416 observations, we estimate a farm credit constraint equation and find that small individual farms (IF) are on average more credit constrained than large corporate farms (CF). Using the estimated parameters we simulate the effect of the recent food price shock. Our results suggest that in the presence of credit market imperfections, the relatively less credit constrained CF benefit more from higher output prices than IF, as they are able to expand their production more flexibly. These findings have implications for the developing countries: not only consumers in the LDC may loose, but also producers, which on average are more credit constrained than farmers in developed countries, may loose their market shares and hence income in the log run.

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Bibliographic Info

Paper provided by International Association of Agricultural Economists in its series 2009 Conference, August 16-22, 2009, Beijing, China with number 51428.

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Date of creation: 2009
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Handle: RePEc:ags:iaae09:51428

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Web page: http://www.iaae-agecon.org/
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Related research

Keywords: Credit constraint; food price shock; heterogeneous firms; Agricultural and Food Policy; Agricultural Finance; Production Economics; Q11; Q12; P23;

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  1. Bhattacharyya, Anjana & Bhattacharyya, Arunava & Kumbhakar, Subal C., 1996. "Government Interventions, Market Imperfections, and Technical Inefficiency in a Mixed Economy: A Case Study of Indian Agriculture," Journal of Comparative Economics, Elsevier, vol. 22(3), pages 219-241, June.
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  8. Ciaian, Pavel & Swinnen, Johan F.M., 2006. "AJAE Appendix: Land Market Imperfections and Agricultural Policy Impacts in the New EU Member States: A Partial Equilibrium Analysis," American Journal of Agricultural Economics Appendices, Agricultural and Applied Economics Association, vol. 88(4), November.
  9. Dries, Liesbeth & Swinnen, Johan F. M., 2004. "Foreign Direct Investment, Vertical Integration, and Local Suppliers: Evidence from the Polish Dairy Sector," World Development, Elsevier, vol. 32(9), pages 1525-1544, September.
  10. Pavel Ciaian & Johan F.M. Swinnen, 2009. "Credit Market Imperfections and the Distribution of Policy Rents," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 1124-1139.
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  14. repec:ags:ajaeap:43894 is not listed on IDEAS
  15. Aleksandr Subbotin, 2005. "Determinants of Access to Credit for Corporate Farms in Russia," Comparative Economic Studies, Palgrave Macmillan, vol. 47(1), pages 181-187, March.
  16. Bester, Helmut, 1985. "Screening vs. Rationing in Credit Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 75(4), pages 850-55, September.
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