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Farm Household Production In The Presence Of Restrictions On Debt: Theory And Policy Implications

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  • Euan Phimister

Abstract

In this paper a two period life cycle model of the farm household is constructed allowing for production and restrictions on debt in which the consumption and production decisions of the farm household are simultaneous. It is shown that the farm household's production responses to exogenous changes may be qualitatively different to that predicted by the profit‐maximising model when all markets are perfect. In particular, when the household is debt constrained, ‘perverse’ output effects are possible with output increasing in response to output price decreases. Further, for such households, compensation payments will have production effects. Finally, the financial situation of the farm has an impact on production for debt constrained farms.

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  • Euan Phimister, 1995. "Farm Household Production In The Presence Of Restrictions On Debt: Theory And Policy Implications," Journal of Agricultural Economics, Wiley Blackwell, vol. 46(3), pages 371-380, September.
    • Handle: RePEc:bla:jageco:v:46:y:1995:i:3:p:371-380
    DOI: 10.1111/j.1477-9552.1995.tb00783.x
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    1. Elhorst, J Paul, 1993. "The Estimation of Investment Equations at the Farm Level," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 20(2), pages 167-182.
    2. Phimister, Euan, 1995. "The Impact of Borrowing Constraints on Farm Households: A Life-Cycle Approach," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 22(1), pages 61-86.
    3. France Caillavet & Herve Guyomard & Robert Lifran & . Esr. Département d'Economie Et Sociologie Ruralesivry, 1994. "Agricultural household modelling and family economics [[Modélisation des ménages agricoles et économie de la famille]]," Post-Print hal-02846786, HAL.
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    6. Brase, Brian T. & LaDue, Eddy L., 1989. "Farmer Investment Behavior: A Review of Literature," Research Bulletins 183306, Cornell University, Department of Applied Economics and Management.
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    1. Frederic Courleux & Herve Guyomard & Fabrice Levert, 2007. "Étude prospective sur le fonctionnement des marchés des droits au paiement et de la réserve nationale mis en place dans le cadre de la réforme de la PAC de juin 2003," Working Papers hal-01595356, HAL.
    2. Kassoum Ayouba & Jean-Philippe Boussemart & Stéphane Vigeant, 2017. "The impact of single farm payments on technical inefficiency of French crop farms," Review of Agricultural, Food and Environmental Studies, Springer, vol. 98(1), pages 1-23, July.
    3. Dingde Xu & Zhixing Ma & Xin Deng & Yi Liu & Kai Huang & Wenfeng Zhou & Zhuolin Yong, 2020. "Relationships between Land Management Scale and Livelihood Strategy Selection of Rural Households in China from the Perspective of Family Life Cycle," Land, MDPI, vol. 9(1), pages 1-15, January.
    4. Fabienne Femenia & Alexandre Gohin & Alain Carpentier, 2010. "The Decoupling of Farm Programs: Revisiting the Wealth Effect," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 836-848.
    5. Bascou, Pierre & Londero, Pierluigi & Munch, Wolfgang, 2004. "Reform and Adjustment in the European Union: The 2003 Reform of the Common Agricultural Policy and Enlargement," IAPRAP\IATRC Summer Symposium, Adjusting to Domestic and International Agricultural Reform in Industrial Countries, June 6-7, 2004, Philadelphia, PA, 15769, International Agricultural Policy Reform and Adjustment Project (IAPRAP).
    6. Carpentier, Alain & Gohin, Alexandre & Heinzel, Christoph, 2012. "Production Effects of Direct Payments to Active Farmers: a Microeconomic Dynamic and Stochastic Analysis," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122447, European Association of Agricultural Economists.
    7. Hervé Guyomard & Louis-Pascal Mahé, 1995. "La nouvelle instrumentation de la politique agricole commune," Économie et Prévision, Programme National Persée, vol. 117(1), pages 15-29.
    8. Hervé Guyomard & Alexandre Gohin & Chantal Le Mouël, 2001. "Instruments de soutien interne des revenus agricoles, effets de distorsion sur les échanges et multifonctionnalité de l'agriculture," Post-Print hal-01937091, HAL.
    9. Abdul-Salam, Yakubu & Phimister, Euan, 2019. "Modelling the impact of market imperfections on farm household investment in stand-alone solar PV systems," World Development, Elsevier, vol. 116(C), pages 66-76.
    10. James Rude, 2008. "Production Effects of the European Union's Single Farm Payment," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 56(4), pages 457-471, December.
    11. Mary, Sebastien & Santini, Fabien & Boulanger, Pierre, 2013. "An Ex-Ante Assessment of CAP Income Stabilisation Payments using a Farm Household Model," 87th Annual Conference, April 8-10, 2013, Warwick University, Coventry, UK 158860, Agricultural Economics Society.
    12. Harris, James Michael & Dillard, John & Erickson, Kenneth W. & Hallahan, Charles B., 2009. "Changes in Debt Patterns and Financial Structure of Farm Businesses: A Double Hurdle Approach," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49402, Agricultural and Applied Economics Association.
    13. Abdul-Salam, Yakubu & Phimister, Euan, 2014. "Modelling the Impact of Market Imperfections on Farm Household Investment in Stand-Alone Solar PV," 88th Annual Conference, April 9-11, 2014, AgroParisTech, Paris, France 169742, Agricultural Economics Society.
    14. Harris, James Michael & Blank, Steven C. & Erickson, Kenneth W. & Hallahan, Charles B., 2010. "Off-farm Income and Investments in Farm Assets: A Double Hurdle Approach," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61531, Agricultural and Applied Economics Association.
    15. Roel Jongeneel & Ana Gonzalez-Martinez, 2022. "EU Dairy after the Quota Abolition: Inelastic Asymmetric Price Responsiveness and Adverse Milk Supply during Crisis Time," Agriculture, MDPI, vol. 12(12), pages 1-16, November.
    16. Rude, James, 2007. "Production Effects of the European Union’s Single Farm Payment," Working Papers 7335, Canadian Agricultural Trade Policy Research Network.
    17. Serra, Teresa & Zilberman, David & Goodwin, Barry K. & Hyvonen, Keijo, 2004. "Replacement Of Price Support Measures By Direct Payments In Agricultural Policies: Does This Benefit The Environment? The Effects Of The Post-1992 Cap On Pest Control In The E.U," 2004 Annual meeting, August 1-4, Denver, CO 20043, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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