Do agricultural subsidies crowd out or stimulate rural credit market institutions? The case of EU Common Agricultural Policy

Pavel Ciaian and Pokrivcak, Jan and Katarina Szegenyova
Authors registered in the RePEc Author Service: Jan Pokrivcak

European Integration online Papers (EIoP), 2012, vol. 16

Abstract: In this paper we estimate the impact of agricultural subsidies granted under the European Union’s Common Agricultural Policy (CAP) on bank loans extended to farms. According to our theoretical analysis, subsidies may either stimulate or crowd out bank loans depending on the timing of subsidies, severity of credit constraint, type of subsidies and bank loans, and the relative cost of internal and external financing. In empirical analysis we use the Farm Accountancy Data Network (FADN) farm level panel data for the period 1995-2007. We employ the fixed effects and generalised method of moment (GMM) models. The estimated results suggest that (i) big farms tend to use subsidies to increase long-term loans, whereas small farms tend to use subsidies to obtain short-term loans; (ii) subsidies tend to crowd out short-term loans for big farms and long-term loans for small farms; (iii) when controlling for the endogeneity, the crowding out effect becomes smaller, but the positive causal effect of subsidies on bank loans remains significant.

Keywords: economics; agricultural subsidies; financial markets; economic performance; policy analysis; regional development; industrial relations; direct effect; budget; model simulations (search for similar items in EconPapers)
Date: 2012-11-29
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://eiop.or.at/eiop/texte/2012-015a.htm Abstract (text/html)
http://eiop.or.at/eiop/pdf/2012-015.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:erp:eiopxx:p0231

Ordering information: This journal article can be ordered from
http://eiop.or.at/eiop/

Access Statistics for this article

European Integration online Papers (EIoP) is currently edited by Gerda Falkner

More articles in European Integration online Papers (EIoP) from European Community Studies Association Austria (ECSA-A) Contact information at EDIRC.
Bibliographic data for series maintained by Editorial Assistant ( this e-mail address is bad, please contact ).