Short- and Long-Run Credit Constraints in French Agriculture: A Directional Distance Function Framework Using Expenditure-Constrained Profit Functions

Stéphane Blancard (), Jean-Philippe Boussemart, Walter Briec and Kristiaan Kerstens
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Walter Briec: JEREM, University of Perpignan

No 2005-ECO-02, Working Papers from IESEG School of Management

Abstract: This empirical application investigates the eventual presence of credit constraints using a panel of French farmers. This is the first European application using a direct modelling approach based upon axiomatic production theory. The credit constrained profit maximisation model proposed by Färe, Grosskopf and Lee is extended in three ways. First, we rephrase the model in terms of directional distance functions to allow for duality with the profit function. Second, we model the presence of credit constraints in the short-run and investment constraints in the long-run using short- respectively long-run profit functions. Third, we lag the expenditure constraint one year to account for the separation between planning and production. We find empirical evidence of both credit and investment constraints, though their relative impact on the degree of financial inefficiency is rather low in the short-run. Financially unconstrained farmers are larger, perform better, and seem to benefit from a virtuous circle where access to financial markets allows better productive choices. In the long-run, almost all farms seem to suffer from credit constraints for financing their investments.

Keywords: proportional distance function; profit function; credit constraint (search for similar items in EconPapers)
JEL-codes: D21 D24 Q12 Q14 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2005-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published in American Journal of Agricultural Economics, May 2006, 88(2), pp. 351-364

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Related works:
Journal Article: Short- and Long-Run Credit Constraints in French Agriculture: A Directional Distance Function Framework Using Expenditure-Constrained Profit Functions (2006)
Working Paper: Short- and Long-Run Credit Constraints in French Agriculture: A Directional Distance Function Framework Using Expenditure-Constrained Profit Functions (2006)
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