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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
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    Cited by:

    1. Talip Kilic & Calogero Carletto & Juna Miluka & Sara Savastano, 2009. "Rural nonfarm income and its impact on agriculture: evidence from Albania," Agricultural Economics, International Association of Agricultural Economists, vol. 40(2), pages 139-160, March.
    2. Bojnec, Stefan & Ferto, Imre, 2011. "Impact of Off-farm Income on Farm Efficiency in Slovenia," 85th Annual Conference, April 18-20, 2011, Warwick University, Coventry, UK 108945, Agricultural Economics Society.
    3. Hohfeld, Lena & Waibel, Hermann, 0. "Investments of Rural Households in Northeast Thailand and the Future of Small Scale Farming," Quarterly Journal of International Agriculture, Humboldt-Universität zu Berlin, vol. 52.
    4. Paul Winters & Vera Chiodi, 2008. "Human capital investment and long-term poverty reduction in rural Mexico," Working Papers halshs-00586227, HAL.
    5. Fertö, Imre, 2014. "The Structural Transformation in Central and Eastern European Agriculture," CEI Working Paper Series 2014-9, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    6. Tom Hertz, 2010. "Heteroskedasticity-robust elasticities in logarithmic and two-part models," Applied Economics Letters, Taylor & Francis Journals, vol. 17(3), pages 225-228, February.
    7. Van Herck, Kristine, 2011. "Where have all the farmers gone? EU Accession and Structural Change in Bulgaria," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114829, European Association of Agricultural Economists.
    8. Mieke Meurs, 2013. "What Makes a Farmer? The Limited Expansion of Commercial Farming Among Bulgarian Smallholders," Working Papers 2013-08, American University, Department of Economics.
    9. Benjamin Davis & Paul Winters & Thomas Reardon & Kostas Stamoulis, 2009. "Rural nonfarm employment and farming: household-level linkages," Agricultural Economics, International Association of Agricultural Economists, vol. 40(2), pages 119-123, March.
    10. Augustyńska-Grzymek, Irena & Skarzyska, Aldona & Abramczuk, Šukasz, 2013. "The pluriactive development of agricultural holdings in Poland with regard to the living standards of their users," Studies in Agricultural Economics, Research Institute for Agricultural Economics, vol. 115(1), February.

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