PurposeThe purpose of this study is to explore the determinants of investment decisions of Estonian farms after the transition to market economy and accession to the European Union (EU), in the ...period 2006–2019.Design/methodology/approachThe paper employs Estonian Farm Accountancy Data Network (FADN) individual farm-level data from the period 2006–2019, and standard and augmented accelerator investment models. Generalised methods of moments (GMM) and bias-corrected least-squares dummy variables (LSDVC) regressions were used to estimate parameters of these models.FindingsIn the considered period, farm investments were positively affected by sales growth, investment subsidies and the cash flow. Decomposition of cash flow into volatile, market income related part, and more stable, farm subsidies related part indicated that investments do not depend on market income part of cash flow. Instead, the stable part of the cash flow (farm subsidies) had a significant and positive effect on investments. This suggests that credit rationing could be present in the EU agriculture, and it depends on the farm subsidies not market income of farms.Originality/valueDespite the wealth of literature on the investment behaviour of farmers, this article is the first attempt to decompose farm cash flow into stable (farm subsidies) and volatile (market income) parts to explain the role of subsidies as a part of cash flow in credit rationing.
This article investigates dairy farm investment behaviour and the presence of soft budget constraints in the dairy farms of Baltic and Central European transition countries - Estonia, Hungary and ...Slovenia - using individual dairy farm accountancy panel data for the years 2007-2015. The empirical results confirm that gross dairy farm investment is positively associated with gross dairy farm investment for the previous year for financially unconstrained dairy farms, and negatively for financially constrained dairy farms. It is also positively associated with public investment subsidies, and, except for Slovenia, with growth in real sales for financially unconstrained dairy farms. Mixed results are found for gross dairy farm investment squared and cash flow variables. A particularly significant negative cash flow regression coefficient implies significant soft budget constraints for financially unconstrained Estonian and Slovenian dairy farms, while insignificant cash flow regression coefficients imply weak soft budget constraints for financially unconstrained Hungarian dairy farms.
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