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The Effect of Non-Farm Income on Investment in Bulgarian Family Farming

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  • Tom Hertz

Abstract

This paper documents a relationship between non-farm income (primarily earnings and pensions) and agricultural outlays in Bulgaria, using the 2003 Multitopic Household Survey. The outcomes analyzed are expenditures on working capital (variable inputs such as feed, seed, and herbicides) and investment in livestock. I find that while non-farm income has no significant effect on the probability of purchasing variable inputs, it does have an effect on the amount spent if positive, with an estimated elasticity of 0.14. Non-farm income also has an effect on the number of households that purchase farm animals, with an estimated elasticity of 0.35. The use of non-farm income for farm investment is consistent with the presence of credit constraints, as is the fact that less than one per cent of farmers report outstanding debts for agricultural purposes. Yet it is also noted that many farm households take out large unsecured loans for other purposes, suggesting that a lack of demand for agricultural borrowing may also be part of the problem.

Suggested Citation

  • Tom Hertz, 2007. "The Effect of Non-Farm Income on Investment in Bulgarian Family Farming," Working Papers 2007-15, American University, Department of Economics.
    • Handle: RePEc:amu:wpaper:1507
    DOI: 10.17606/m8bp-de82
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