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Investment and Financial Constraints in European Agriculture: Evidence from France, Hungary and Slovenia

Author

Listed:
  • Imre Ferto

    () (Institute of Economics Research Centre for Economic and Regional Studies Hungarian Academy of Sciences)

  • Zoltan Bakucs

    () (Institute of Economics Research Centre for Economic and Regional Studies Hungarian Academy of Sciences)

  • Stefan Bojnec

    () (University of Primorska, Faculty of Management, Slovenia)

  • Laure Latruffe

    () (L'Institut national de la recherche agronomique (Inra) France Economics Unit "SMART" Unit‚ Structures et March‚s Agricoles, Ressources et Territoires)

Abstract

The article investigates the investment and financial constraints for French, Hungarian and Slovenian farms using FADN panel data with different econometric estimation approaches. Farm gross investment is positively associated with real sales growth and cash flow implying the absence of soft budget constraint. Gross farm investment is positively associated with investment subsidies. Specific results by country are found depending on farm indebtedness. Investment subsidies can mitigate some capital market imperfections in short-term, while on long-term what is crucial is farm sale ability to successfully compete in the output market gaining sufficient cash flow for farm competitive survival and investment.

Suggested Citation

  • Imre Ferto & Zoltan Bakucs & Stefan Bojnec & Laure Latruffe, 2012. "Investment and Financial Constraints in European Agriculture: Evidence from France, Hungary and Slovenia," IEHAS Discussion Papers 1213, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  • Handle: RePEc:has:discpr:1213
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    References listed on IDEAS

    as
    1. 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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    3. Bojnec, Stefan & Latruffe, Laure, 2007. "Investment of Slovenian farms in the transition context," 104th Seminar, September 5-8, 2007, Budapest, Hungary 7827, European Association of Agricultural Economists.
    4. Budina, Nina & Garretsen, Harry & Jong, Eelke de, 1999. "Liquidity constraints and investment in transition economies : the case of Bulgaria," Research Report 00E05, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
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    11. 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.
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    Cited by:

    1. Lefebvre, Marianne & Gomez y Paloma, Sergio & Viaggi, Davide, 2014. "EU farmers' intentions to invest in 2014-2020: complementarity between asset classes," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182737, European Association of Agricultural Economists.

    More about this item

    Keywords

    farm investment; soft budget constraint; investment subsidy; panel data analysis;

    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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