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

Author

Listed:
  • 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))

Abstract

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.

Suggested Citation

  • Jan Fałkowski & Pavel Ciaian & d'Artis Kancs, 2009. "Access to Credit, Factor Allocation and Farm Productivity: Evidence From the CEE Transition Economies," Working Papers 2009-12, Faculty of Economic Sciences, University of Warsaw.
  • Handle: RePEc:war:wpaper:2009-12
    as

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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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    References listed on IDEAS

    as
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    2. James J. Heckman & Hidehiko Ichimura & Petra E. Todd, 1997. "Matching As An Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Oxford University Press, vol. 64(4), pages 605-654.
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    Cited by:

    1. Ciaian, Pavel & Pokrivcak, Jan and Katarina Szegenyova, 2012. "Do agricultural subsidies crowd out or stimulate rural credit market institutions? The case of EU Common Agricultural Policy," European Integration online Papers (EIoP), European Community Studies Association Austria (ECSA-A), vol. 16, November.
    2. Witte, Taylor & DeVuyst, Eric & Whitacre, Brian & Jones, Rodney, 2015. "Determining the Impact of a New Farm Credit Branch in East Central Oklahoma," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196674, Southern Agricultural Economics Association.
    3. Jarko Fidrmuc & Pavel Ciaian & d'Artis Kancs & Jan Pokrivcak, 2013. "Credit Constraints, Heterogeneous Firms and Loan Defaults," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 53-68, May.
    4. Ciaian, Pavel & Kancs, d'Artis, 2011. "The Impact of Market Imperfections on Heterogeneous Firm Output, Productivity, and Profit," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 39(1).
    5. Kata, Ryszard & Walenia, Alina, 0. "Financial Exclusion Of Farmers And Rural Entrepreneurs," Journal of Agribusiness and Rural Development, University of Life Sciences, Poznan, Poland, issue 2.

    More about this item

    Keywords

    access to credit; investment; factor allocation; productivity; transition countries;

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • P14 - Economic Systems - - Capitalist Systems - - - Property Rights

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