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The Impact of Credit Market Imperfections on Farm Investment in Poland

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  • Laure Latruffe

Abstract

The objective of this article is to confirm the presence of imperfections on the rural credit market in Poland in the second half of the transition period, and to identify farms that were the most affected by these imperfections. For this, an investment accelerator model augmented with a cash flow variable was used on panel data for individual farms during 1996-2000. The cash flow coefficient was found to be significant and positive, indicating a poorly functioning rural credit market, in the sense that for some farms internal funds were the only source of funds (for farms facing credit rationing) or a less expensive source (for farms facing high borrowing costs) than debt. Farms facing more severe credit constraints were then identified by splitting the sample into two groups according to a single criterion but also by creating classes with a multiple component analysis. Farms less collateralisable were found to have experienced the most severe constraints. This finding is in line with other existing studies on Polish farms and is in contradiction with Polish government intervention that favoured subsidised loans rather than guaranteed credit during the period studied.

Suggested Citation

  • Laure Latruffe, 2005. "The Impact of Credit Market Imperfections on Farm Investment in Poland," Post-Communist Economies, Taylor & Francis Journals, vol. 17(3), pages 349-362.
  • Handle: RePEc:taf:pocoec:v:17:y:2005:i:3:p:349-362
    DOI: 10.1080/14631370500204370
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    Citations

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    Cited by:

    1. 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.
    2. Bakucs, Lajos Zoltán & Ferto, Imre & Fogarasi, József, 2009. "Investment and financial constraints in Hungarian agriculture," Economics Letters, Elsevier, vol. 104(3), pages 122-124, September.
    3. Fogarasi, Jozsef & Latruffe, Laure, 2009. "Farm performance and support in Central and Western Europe: a comparison of Hungary and France," 83rd Annual Conference, March 30-April 1, 2009, Dublin, Ireland 51053, Agricultural Economics Society.
    4. Pavel Ciaian & d’Artis Kancs, 2011. "The Impact Of Food Price Shock On Heterogeneous Credit Constrained Firms," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 82(2), pages 115-137, June.
    5. Ciaian, Pavel & Pokrivcak, Jan, 2011. "Do agricultural subsidies crowd out or stimulate rural credit institutions? The Case of CAP Payments," Working Papers 117485, Factor Markets, Centre for European Policy Studies.
    6. Nataliya Zinych & Martin Odening, 2009. "Capital market imperfections in economic transition: empirical evidence from Ukrainian agriculture," Agricultural Economics, International Association of Agricultural Economists, vol. 40(6), pages 677-689, November.
    7. Laure Latruffe & Sophia Davidova & Elodie Douarin & Matthew Gorton, 2008. "Farm expansion in Lithuania after accession to the EU: The role of CAP payments in alleviating potential credit constraints," Working Papers SMART - LERECO 08-06, INRA UMR SMART-LERECO.
    8. Pavel Ciaian & Jan Fałkowski & D’Artis Kancs, 2012. "Productivity and credit constraints: A firm-level propensity score evidence for agricultural farms in central and east European countries," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 62(4), pages 459-487, December.
    9. Curtiss, Jarmila & Ratinger, Tomáš & Medonos, Tomáš, 2012. "Ownership and Investment Behaviour in Transition Countries: A Case Study of Collective and Corporate Farms in the Czech Republic," Factor Markets Working Papers 121, Centre for European Policy Studies.
    10. Bojnec, Stefan, 2011. "Agricultural and Rural Capital Markets in the EU Candidate Countries: Croatia, the Former Yugoslav Republic of Macedonia and Turkey," Working Papers 117489, Factor Markets, Centre for European Policy Studies.
    11. Raushan Bokusheva & Irina Bezlepkina & Alfons Oude Lansink, 2009. "Exploring Farm Investment Behaviour in Transition: The Case of Russian Agriculture," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(2), pages 436-464.
    12. Fertő, Imre & Bakucs, Lajos Zoltán & Fogarasi, József, 2007. "A puha költségvetési korlát és a hitelpiaci tökéletlenségek hatása a beruházásokra a magyar mezőgazdaságban
      [The effect of soft budget constraint and credit-market imperfections on investments in H
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 322-333.
    13. Pavel Ciaian & Jan Falkowski & d'Artis Kancs, 2012. "Access to credit, factor allocation and farm productivity: Evidence from the CEE transition economies," Agricultural Finance Review, Emerald Group Publishing, vol. 72(1), pages 22-47, May.
    14. Latruffe, Laure & Davidova, Sophia & Douarin, Elodie & Gorton, Matthew, 2008. "Can the CAP payments facilitate the growth of individual farms in the NMS post-EU accession?," 82nd Annual Conference, March 31 - April 2, 2008, Royal Agricultural College, Cirencester, UK 36861, Agricultural Economics Society.
    15. Ciaian, Pavel & Fa?kowski, Jan & d’Artis, Kanc & Pokrivcak, Jan, 2011. "Productivity and Credit Constraints: Firm-Level Evidence from Propensity Score Matching," Factor Markets Working Papers 99, Centre for European Policy Studies.
    16. Kułyk Piotr, 2012. "The imperfections of a credit market in agriculture," Management, De Gruyter Open, vol. 16(1), pages 250-263, May.
    17. Zinych, Nataliya & Odening, Martin, 2009. "How Costly are (Agricultural) Investments during Economic Transition? A Critical Literature Appraisal," 2009 Conference, August 16-22, 2009, Beijing, China 50319, International Association of Agricultural Economists.
    18. Céline Bignebat & Laure Latruffe, 2009. "Twenty years of land reforms in Central and Eastern Europe: state of play and outlook," Working Papers SMART - LERECO 09-19, INRA UMR SMART-LERECO.
    19. Curtiss, Jarmila & Ratinger, Tomas & Medonos, Tomas, 2012. "Ownership and Investment Behaviour in Transition Countries: A Case Study of Collective and Corporate Farms in the Czech Republic," Working Papers 122841, Factor Markets, Centre for European Policy Studies.
    20. Ferto, Imre & Bakucs, Lajos Zoltan & Bojnec, Stefan & Latruffe, Laure, 2011. "Investment and Financial Constraints in European Agriculture: Evidence from France, Hungary and Slovenia," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114357, European Association of Agricultural Economists.
    21. 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), Brussels.
    22. Pavel Ciaian & Johan F.M. Swinnen, 2007. "Credit Market Imperfections and the Distribution of Policy Rents: The Common Agricultural Policy in the New EU Member States," LICOS Discussion Papers 18307, LICOS - Centre for Institutions and Economic Performance, KU Leuven.

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