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Short‐ and Long‐Run Credit Constraints in French Agriculture: A Directional Distance Function Framework Using Expenditure‐Constrained Profit Functions
Author(s) -
Blancard Stéphane,
Boussemart Jean-Philippe,
Briec Walter,
Kerstens Kristiaan
Publication year - 2006
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2006.00863.x
Subject(s) - profit maximization , virtuous circle and vicious circle , profit (economics) , economics , short run , constraint (computer aided design) , investment (military) , microeconomics , maximization , function (biology) , lag , econometrics , computer science , macroeconomics , mathematics , computer network , geometry , politics , political science , law , evolutionary biology , biology
This empirical application investigates the eventual presence of credit constraints using a panel of French farmers. The credit‐constrained profit maximization 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 duality with the profit function. Second, we model credit constraints in the short‐run and investment constraints in the long‐run using short‐ and 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 credit and investment constraints. Financially unconstrained farmers are larger, perform better, and seem to benefit from a virtuous circle where access to financial markets allows better productive choices.