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Access to Credit, Factor Allocation and Farm Productivity: Evidence From the CEE Transition Economies

  • Jan Fałkowski

    ()

    (Faculty of Economic Sciences, University of Warsaw)

  • Pavel Ciaian

    (European Commission - Joint Research Centre (IPTS)
    Catholic University of Leuven (LICOS)
    Economics and Econometrics Research Institute (EERI))

  • d'Artis Kancs

    (European Commission - Joint Research Centre (IPTS)
    Catholic University of Leuven (LICOS)
    Economics and Econometrics Research Institute (EERI))

This paper analyses how farm access to credit affects farm input allocation and farm efficiency in the CEE transition countries. Drawing on a unique farm level panel data with 37,409 observations and employing a matching estimator we are able to control for the key source of endogeneity – unoberserved heterogeneity. We find that farms are credit constrained both in the short-run as well as in the long-run, but that credit constraint is asymmetric between inputs. Our estimates suggest that farm access to credit increases TFP up to 1.9% per 1000 EUR of additional credit. The use of variable inputs and capital investment increases up to 2.3% and 29%, respectively, per 1000 EUR of additional credit. Due to credit-financed investment in labour-saving farm equipment, labour use reduces for low level of credit. Farms are found not to be credit constrained with respect to land.

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File URL: http://www.wne.uw.edu.pl/inf/wyd/WP/WNE_WP22.pdf
File Function: First version, 2009
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Paper provided by Faculty of Economic Sciences, University of Warsaw in its series Working Papers with number 2009-12.

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Length: 31 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:war:wpaper:2009-12
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