Dilemmas of budget support to agricultural investments

Jacek Kulawik

No 249744, Problems of Agricultural Economics / Zagadnienia Ekonomiki Rolnej from Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI)

Abstract: Agricultural investments are the key determinant of economic growth and development of the sector, its flexibility and stability as well as better income and civilisational situation of farmers. Their funding is a serious challenge, though. This follows from slow capital circulation – which is typical for agriculture, low and highly variable rate of equity creation and surplus cash. To this add failure and incompleteness of financial markets and, above all, loan in the surrounding of agriculture that are strongly underlined by Keynesian and Post-Keynesian economics. In such conditions, in most of the countries worldwide, state budget is involved in the area of agricultural investments. This support is most often direct, it influences the financial potential of agriculture and due to political economy mechanisms it tends to persist. Therefore, the methods of budget efficiency of the investment aid should, at one go, consider its allocative, redistributive and stabilising aspects. The review of empirical research results, demonstrated in the paper, shows that efficiency of the aid is usually low and can even strengthen the development problems of the agricultural sector, contributing to take up subsequent public interventions. Consequently, agricultural politicians and makers of the programmes, which provide funds to support agricultural investment, need to devote more attention to creating a climate indirectly encouraging to make investments and make available repayable instruments.

Keywords: Agricultural Finance; Community/Rural/Urban Development; International Development (search for similar items in EconPapers)
Pages: 20
Date: 2016
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:iafepa:249744

DOI: 10.22004/ag.econ.249744

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