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The impact of non-farm income on the investment in agriculture: evidence from Hungary and Slovenia

Author

Listed:
  • Bakucs, Lajos Zoltan
  • Bojnec, Stefan
  • Ferto, Imre
  • Latruffe, Laure

Abstract

The article investigates the impact of non-farm income on the investment for Hungarian and Slovenian farms using FADN panel data for the years 2004-2008 and different econometric estimation approaches. We find that non-farm income is more important for Slovenian farms than for Hungarian farms. Farm gross investment is positively associated with real sales growth and cash flow implying the absence of soft budget constraint. Gross farm investment is negatively associated with non-farm income, but positively associated with investment subsidies. Specific results by country are found depending on growing vs. declining real sales and on farm indebtedness.

Suggested Citation

  • Bakucs, Lajos Zoltan & Bojnec, Stefan & Ferto, Imre & Latruffe, Laure, 2010. "The impact of non-farm income on the investment in agriculture: evidence from Hungary and Slovenia," 118th Seminar, August 25-27, 2010, Ljubljana, Slovenia 95318, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaa118:95318
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    Keywords

    non-farm income; farm investment; soft budget constraint; panel data analysis; Community/Rural/Urban Development; D81; D92; O12; Q12; C23;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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