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Access to Credit, Factor Allocation and Farm Productivity: Evidence From the CEE Transition Economies

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  • Ciaian, Pavel
  • Falkowski, Jan
  • Kancs, d'Artis

Abstract

This paper analyses how farm access to credit affects farm input allocation and farm efficiency in the CEE countries. Drawing on a unique farm level panel data with 37,409 observations and employing a matching estimator we are able to control for the key source of endogeneity – unoberserved heterogeneity. We find that farms are credit constrained both in the short-run as well as in the long-run, but that credit constraint is asymmetric between inputs. Our estimates suggest that farm access to credit increases TFP up to 1.9% per 1000 EUR of additional credit. The use of variable inputs and capital investment increases up to 2.3% and 29%, respectively, per 1000 EUR of additional credit. Due to credit-financed investment in labour-saving farm equipment, labour use reduces for low level of credit Farms are found not to be credit constrained with respect to land.

Suggested Citation

  • Ciaian, Pavel & Falkowski, Jan & Kancs, d'Artis, 2010. "Access to Credit, Factor Allocation and Farm Productivity: Evidence From the CEE Transition Economies," 114th Seminar, April 15-16, 2010, Berlin, Germany 61347, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaa114:61347
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    References listed on IDEAS

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    1. Barry, Peter J. & Robison, Lindon J., 2001. "Agricultural finance: Credit, credit constraints, and consequences," Handbook of Agricultural Economics,in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 10, pages 513-571 Elsevier.
    2. 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.
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    Cited by:

    1. Jarko Fidrmuc & Pavel Ciaian & d'Artis Kancs & Jan Pokrivcak, 2013. "Credit Constraints, Heterogeneous Firms and Loan Defaults," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 53-68, May.
    2. Ciaian, Pavel & Pokrivcak, Jan and Katarina Szegenyova, 2012. "Do agricultural subsidies crowd out or stimulate rural credit market institutions? The case of EU Common Agricultural Policy," European Integration online Papers (EIoP), European Community Studies Association Austria (ECSA-A), vol. 16, November.
    3. Ciaian, Pavel & Kancs, d'Artis, 2011. "The Impact of Market Imperfections on Heterogeneous Firm Output, Productivity, and Profit," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 39(1).
    4. Witte, Taylor & DeVuyst, Eric & Whitacre, Brian & Jones, Rodney, 2015. "Determining the Impact of a New Farm Credit Branch in East Central Oklahoma," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196674, Southern Agricultural Economics Association.
    5. Kata, Ryszard & Walenia, Alina, 0. "Financial Exclusion Of Farmers And Rural Entrepreneurs," Journal of Agribusiness and Rural Development, University of Life Sciences, Poznan, Poland, issue 2.

    More about this item

    Keywords

    Access to credit; investment; factor allocation; productivity; transition countries; Agricultural and Food Policy; Farm Management; Land Economics/Use; Q12; P14;

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • P14 - Economic Systems - - Capitalist Systems - - - Property Rights

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