Financial constraints and farm investments in Slovenia
New Medit, vol 15, n.4, (December 2016), pp. 2-9
Jel classification: C33, G31, H25, Q14
The paper investigates financial constraints and investment behaviour in Slovenian agriculture using Farm Accountancy Data Network employing a bootstrap Least Squares Dummy Variables Corrected sample selection model. The baseline Euler equation model is controlled for the impacts of off-farm income, farm efficiency, family farm organization, and financial status for differentials across farms. We find that the off-farm income and being family farm have less impact on farm investments. More efficient farms invest more than less efficient farms. The indebted farms use debts and invest more than non-indebted farms. The results indicate the persistence of financial constraints for farm investments, particularly for family farms. As guidelines for economic policy is suggested more effective financial support through the creation of beneficial lines of credit designed specifically to support viable farm investments, particularly for family farms, which prevails in the country’s farm structures. Finally, more effective policy mechanism is needed for the heavy indebted farm households, which is of relevance also for other transition and emerging market economies.