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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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Listed:
  • Stéphane Blancard
  • Jean-Philippe Boussemart
  • Walter Briec
  • Kristiaan Kerstens

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, Oxford University Press.

Suggested Citation

  • Stéphane Blancard & Jean-Philippe Boussemart & Walter Briec & Kristiaan Kerstens, 2006. "Short- and Long-Run Credit Constraints in French Agriculture: A Directional Distance Function Framework Using Expenditure-Constrained Profit Functions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(2), pages 351-364.
  • Handle: RePEc:oup:ajagec:v:88:y:2006:i:2:p:351-364
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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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