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Short- and Long-Run Credit Constraints in French Agriculture: A Directional Distance Function Framework Using Expenditure-Constrained Profit Functions

Author

Listed:
  • Stéphane Blancard

    (CERESUR, University of La Réunion)

  • Jean-Philippe Boussemart

    (GREMARS, University of Lille 3)

  • Walter Briec

    (JEREM, University of Perpignan)

  • Kristiaan Kerstens

    () (CNRS-LABORES and IESEG School of Management)

Abstract

This empirical application investigates the eventual presence of credit constraints using a panel of French farmers. This is the first European application using a direct modelling approach based upon axiomatic production theory. The credit constrained profit maximisation model proposed by Färe, Grosskopf and Lee is extended in three ways. First, we rephrase the model in terms of directional distance functions to allow for duality with the profit function. Second, we model the presence of credit constraints in the short-run and investment constraints in the long-run using short- respectively long-run profit functions. Third, we lag the expenditure constraint one year to account for the separation between planning and production. We find empirical evidence of both credit and investment constraints, though their relative impact on the degree of financial inefficiency is rather low in the short-run. Financially unconstrained farmers are larger, perform better, and seem to benefit from a virtuous circle where access to financial markets allows better productive choices. In the long-run, almost all farms seem to suffer from credit constraints for financing their investments.

Suggested Citation

  • Stéphane Blancard & Jean-Philippe Boussemart & Walter Briec & Kristiaan Kerstens, 2005. "Short- and Long-Run Credit Constraints in French Agriculture: A Directional Distance Function Framework Using Expenditure-Constrained Profit Functions," Working Papers 2005-ECO-02, IESEG School of Management.
  • Handle: RePEc:ies:wpaper:e200502
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    proportional distance function; profit function; credit constraint;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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