Credit constraints, heterogeneous farms and price volatility: Micro-evidence from the new EU member states

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Abstract:

This paper develops a heterogeneous farm/company/organizational model with market imperfections to study traded agricultural commodity price volatility. From the structural model, the authors derive farm credit constraint equations and production functions, which are estimated by employing unique farm-level panel data. Using the estimated model parameters, they employ a structural model to simulate price volatility in agricultural input and output markets. They find that, in the presence of credit market imperfections and farm heterogeneity, less credit-constrained farms benefit more from food price volatility than more credit-constrained farms, as such farms can adjust their output to new market conditions more rapidly and flexibly.

Keywords: CREDIT CONSTRAINT; EU; HETEROGENEOUS FARMS; PRICE VOLATILITY

Document Type: Research Article

DOI: http://dx.doi.org/10.5367/oa.2011.0039

Publication date: June 1, 2011

More about this publication?
  • Outlook on Agriculture is an international peer-review journal devoted to agricultural science, policy and strategy. The journal is published quarterly and provides analysis, reviews and commentary for an international and interdisciplinary readership. Special attention is paid to agricultural policy, international trade in the agricultural sector, strategic developments in food production, the role of agriculture in social and economic development, agriculture in developing countries, and environmental issues. Readers include academics, policy makers and practitioners. For more details go to www.ippublishing.com
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