Search results for: CEPS Factor Markets Working Paper in Series Title

Agricultural and Rural Capital Markets in the EU Candidate Countries: Croatia, the Former Yugoslav Republic of Macedonia and Turkey

Author(s): Štefan Bojnec / Language(s): English / Publication Year: 2011

This paper analyses agricultural and rural capital factor markets in the three European Union candidate countries: Croatia, the Former Yugoslav Republic (FYR) of Macedonia and Turkey. Aggregate capital market indicators and their dynamics, and factors driving agricultural and rural capital markets are analysed and compared in these countries. In general, agricultural and rural capital markets show similarities with general capital market developments, but agricultural and rural capital markets are facing specific credit constraints related to agricultural assets and rural fixed asset specificities, which constrain their mortgages and collateral use. Credit market imperfections have limited access to the investment credits necessary for there structuring of small-scale individual farms. Government transfers are used to differing extents in the candidate countries, but generally tend to increase over time. Remittances and donor funds have also played an important role in agricultural and rural economy investments.

Agricultural and Rural Labour Markets in the EU Candidate Countries of Croatia, Former Yugoslav Republic of Macedonia and Turkey

Author(s): Štefan Bojnec / Language(s): English / Publication Year: 2011

This paper provides an overview and comparison of labour markets in agricultural and rural areas inthe three candidate countries for the EU membership: Croatia, the Former Yugoslav Republic of Macedonia and Turkey. We analyse and compare the labour market structures and the factors drivingthem. The analyses are based on the available cross-section and time-series data on agricultural labour structures and living conditions in rural areas. Considerable differences are found among the candidate countries in the importance of the agricultural labour force, between rural and urban labour, and in poverty and living conditions in rural areas. Agricultural and rural labour market structures are the result of demographic and education processes, in addition to labour flows between agricultural and non-agricultural activities, from rural areas to urban ones and migration flows abroad. Declines in the agricultural labour force and rural population are fore seen for each of the candidate countries, but with significant variations between them.

Developments in the Agricultural and Rural Capital Market of the Former Yugoslav Republic of Macedonia

Author(s): Štefan Bojnec,Biljana Angelova / Language(s): English / Publication Year: 2011

The undeveloped rural capital market in the Former Yugoslav Republic of Macedonia is constrained byan urban–rural development gap, with limited capacities for rural development and imperfections in the rural capital market. Among the most striking hindrances are the illegal status of a large share of agricultural buildings and other real estate in rural areas, particularly on the individual family farms that prevail in the country, and the insufficient knowledge and abilities of individual farmers in applying for credit. National, EU and other donor funds are being used to improve knowledge, skills and other human resources, and to address the illegal status of buildings and facilities. During the most recent years, government support for agricultural, rural and regional development has been introduced to promote good agricultural practices, production and economic activity in rural areas. The elimination of imperfections and improvements to the functioning of the capital market – making access to credit and funds easier, especially for small-scale family farms and for rural development –are seen as measures contributing to agriculture and more balanced rural and regional development.

Do agricultural subsidies crowd out or stimulate rural credit institutions?

The Case of CAP Payments

Author(s): Pavel Ciaian,Ján Pokrivčák,Katarina Szegenyova / Language(s): English / Publication Year: 2011

In this paper we estimate the impact of subsidies from the EU’s common agricultural policy on farm bank loans. According to the theoretical results, if subsidies are paid at the beginning of the growing season they may reduce bank loans, where as if they are paid at the end of the season they increase bank loans, but these results are conditional on whether farms are credit constrained and on the relative cost of internal and external financing. In the empirical analysis, we use farm-level panel data from the Farm Accountancy Data Network to test the theoretical predictions for the period 1995–2007. We employ fixed-effects and generalised method of moment models to estimate the impact of subsidies on farm loans. The results suggest that subsidies influence farm loans and the effects tend tobe non-linear and indirect. The results also indicate that both coupled and decoupled subsidies stimulate long-term loans, but the long-term loans of large farms increase more than those of small farms, owing to decoupled subsidies. Furthermore, the results imply that short-term loans are affected only by decoupled subsidies, and they are altered by decoupled subsidies more for small farms than for large farms; however, when controlling for endogeneity, only the decoupled payments affect loans and the relationship is non-linear.

Farm-level Capital: Capital positions, structures, the dynamics of farm-level investments, capital accumulation and leverage positions

Author(s): Anna-Maija Heikkilä,Kyösti Pietola,Sami Myyrä / Language(s): English / Publication Year: 2011

This paper aims to describe and highlight the key issues of farm capital structures, the dynamics of investments and accumulation of farm capital, and the financial leverage and borrowing rates on farms in selected European countries. Data collected from the Farm Account Data Network (FADN) suggest that the European farming sector uses quite different farm business strategies, capabilities to generate capital revenues, and segmented agricultural loan market regimes. Such diverse business strategies have substantial, and perhaps more substantial than expected, implications for the financial leverage and performance of farms. As an illustration, the financial risks clearly increased in the Danish agricultural sector with loan rates following an upward sloping trend in 2006; the first sign of the forth coming financial crisis that may also severely hit highly leveraged agricultural firms.

Land Markets in the EU Candidate Countries of Croatia, Former Yugoslav Republic of Macedonia and Turkey

Author(s): Štefan Bojnec / Language(s): English / Publication Year: 2011

The paper provides an overview and a comparison of land markets covering the three candidate countries for European Union membership: Croatia, the Former Yugoslav Republic (FYR) of Macedonia and Turkey. We analyse and compare agricultural land structures and factors driving land markets. The analyses are based on the available cros-ssection and time-series evidence on agricultural land structures and land productivity (yields). The land productivity measured by production per hectare of agricultural land varies between the three countries. Agricultural land structures are the result of historical evolutionin land markets and land-leasing developments with additional different institutional environments and agrarian and land reforms.

Productivity and Credit Constraints

Firm-Level Evidence from Propensity Score Matching

Author(s): Pavel Ciaian,Jan Falkowski,D’Artis Kancs,Ján Pokrivčák / Language(s): English / Publication Year: 2011

Drawing on a unique, farm-level, panel dataset with 37,409 observations and employing a matching, estimator, this paper analyses how farm access to credit affects farm input allocation and farm efficiency in the Central and Eastern European transition countries.

Rural Labour Market Developments in the Former Yugoslav Republic of Macedonia

Author(s): Štefan Bojnec,Verica Janeska / Language(s): English / Publication Year: 2011

The significant changes in the quantitative and qualitative characteristics of human resources in rural Macedonia can be explained by the continued trend of emigration from villages tourban areas and abroad. The intensity of emigration has altered the demographic structure and reproductive base of the rural population, along with the income of rural households. The rural and agricultural labour market faces a mismatch with respect to the unfavourable age, education and spatial distribution of the total labour force. A reduction in the participation of women in the agricultural labour force is a new feature. The overall transformation is apparent in the income structure of rural households. An increase in the share of households with mixed income sources notably stems from households that receivere mittances and foreign currency funds from family members abroad.

The Penetration of Financial Instability in Agricultural Credit and Leveraging

Author(s): Anna-Maija Heikkilä,Sami Myyrä,Kyösti Pietola / Language(s): English / Publication Year: 2011

This paper describes the aggregate rural capital markets of the EU and the main differences between the markets of its member countries. The results of our study suggest that the agricultural credit markets are still quite segmented and the segments are country- rather than currency- or regionspecific. Financial instability in Europe is also penetrating the agricultural sector and the variation of interest rates for agricultural credit is increasing across countries. Perhaps the most dramatic signal of growing financial instability is that the financial leverage (gearing rate) of European farms rose in 2008 by almost 4 percentage points, from 14 to 18%. The 4 percentage-point annual rise was twice the 2 percentage-point rise observed during the economic recession in the late 1980s and early 1990s. The distribution of the financial leverage of agriculture across countries does not, however, reflect the distribution of country-specific risk premiums in the manner that they are observed in government bond yields. Therefore, in those countries that have the weakest financial situation in the public sector and in which the bond markets are encumbered with high country-specific risk premiums, the agricultural sector is not directly exposed to a very large risk of increasing interest rates, since it is not so highly leveraged. For example in Greek and Spanish agriculture, the financial leverage (gearing) rate is only 0.6% and 2.2% respectively, while the highest gearing rates are found elsewhere (in Denmark), reaching 50%.

The Valuation of Agricultural Land and the Influence of Government Payments

Author(s): Klaus Salhofer,Paul Feichtinger / Language(s): English / Publication Year: 2011

This study gives an overview of the theoretical foundations, empirical procedures and derived results of the literature identifying determinants of land prices. Special attention is given to the effects of different government support policies on land prices. Since almost all empirical studies on the determination of land prices refer either to the net present value method or the hedonic pricing approach as a theoretical basis, a short review of these models is provided. While the two approaches have different theoretical bases, their empirical implementation converges. Empirical studies use abroad range of variables to explain land values and we systematise those into six categories. In order to investigate the influence of different measures of government support on land prices, a metaregression analysis is carried out. Our results reveal a significantly higher rate of capitalisation for decoupled direct payments and a significantly lower rate of capitalisation for agri-environmental payments, as compared to the rest of government support. Furthermore, the results show that taking theoretically consistent land rents (returns to land) and including non-agricultural variables like urban pressure in the regression implies lower elasticities of capitalisation. In addition, we find a significant influence of the land type, the data type and estimation techniques on the capitalisation rate.