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Farm investment, credit rationing, and public credit policy in Poland: a microeconometric analysis

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  • Petrick, Martin

Abstract

The aim of this paper is to empirically analyse the effects of governmentally promoted credit access on the investment behaviour of credit rationed farmers. This is done by specifying an empirical investment equation which is estimated on a cross-sectional sample of Polish farm household data. In contrast to conventional neo-classical investment models, the investment equation contains the financial variable long-term credit access, which plays the central role in this study. The econometric analysis is used to analyse the determinants of credit access and estimate the marginal effect of credit on investment, which in turn provides the key information for policy evaluation. The results suggest that access to subsidised credit has a significant role in determining investment behaviour of farmers who self-classified as being exogenously credit constrained. This classification applies to 45 percent of all respondents. Major determinants of credit rationing are the reputation of the borrower and the demographic household composition. In various specifications of the creditinvestment relationship, including a cubic Tobit model, the average marginal effect of credit on investment was smaller than one. This implies that credit is partly used for other purposes than productive investment. Every second borrower invests less in productive assets than borrowed. However, over a commonly observed range, the marginal effect increases with an increasing credit volume. Even so, the investment volume is negatively related to farm size. A government policy aiming at the promotion of productive investment should hence emphasise lending in larger amounts without discriminating small farms.

Suggested Citation

  • Petrick, Martin, 2002. "Farm investment, credit rationing, and public credit policy in Poland: a microeconometric analysis," IAMO Discussion Papers 43, Leibniz Institute of Agricultural Development in Transition Economies (IAMO).
    • Handle: RePEc:zbw:iamodp:14872
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    1. Petrick, Martin & Spychalski, Grzegorz & Switlyk, Michal & Tyran, Ewa, 2002. "Economic Situation and Development Perspectives of Farms in Poland - An Analysis Based on Survey Data from Selected Polish Voivodships and a Comparison with German Farms," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 51(04), pages 1-12.
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    Cited by:

    1. Laure Latruffe & . Hampshire, 2004. "Investment and financial constraints of Polish farmers," Post-Print hal-02283463, HAL.

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    More about this item

    Keywords

    farm investment; credit policy; Poland; microeconometrics; landwirtschaftliche Investitionen; Kreditpolitik; Polen; Mikroökonometrie;
    All these keywords.

    JEL classification:

    • 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
    • P32 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Collectives; Communes; Agricultural Institutions

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