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The Investment behaviour of dairy farms in transition economies

Author

Listed:
  • Imre Ferto

    (Institute of Economics, Centre for Economic and Regional Studies, Lorand Eotvos Research Network, Budapest, Hungary)

  • Štefan Bojnec

    (Faculty of Management, University of Primorska, Koper, Slovenia)

  • Jozsef Fogarasi

    (Keleti Károly Faculty of Business and Management, Óbuda University, Budapest, Hungary)

  • Ants-Hannes Viira

    (Institute of Economics and Social Sciences, Estonian University of Life Sciences, Tartu, Estonia)

Abstract

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.

Suggested Citation

  • Imre Ferto & Štefan Bojnec & Jozsef Fogarasi & Ants-Hannes Viira, 2021. "The Investment behaviour of dairy farms in transition economies," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 21(1), pages 60-84.
    • Handle: RePEc:bic:journl:v:21:y:2021:i:1:p:60-84
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    File URL: https://www.tandfonline.com/doi/pdf/10.1080/1406099X.2021.1920754?needAccess=true
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    More about this item

    Keywords

    Dairy farm investment behaviour; soft budget constraint; investment subsidy; Euler equation; Baltic and Central Europe;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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