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Agricultural soft budget constraints in new European Union member states

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  • Fertő, Imre
  • Bojnec, Štefan
  • Fogarasi, József
  • Viira, Ants Hannes

Abstract

This article investigates farm investment behaviour and the presence of soft budget constraints in the agricultural sectors of three Central and Eastern European countries – Estonia, Hungary and Slovenia – using individual farm accountancy panel data for the 2007–2015 period. Gross farm investment is positively associated with gross farm investment for the previous year, growth in real sales and public investment subsidies. Mixed results for debt square and cash flow variables imply that the different investment behaviour of farms pertains to different structures of investment sources among the countries under analysis. A particularly significant negative cash flow coefficient implies strong soft budget constraints for Estonian farms, while insignificant cash flow coefficients imply weak soft budget constraints for Hungarian and Slovenian farms.

Suggested Citation

  • Fertő, Imre & Bojnec, Štefan & Fogarasi, József & Viira, Ants Hannes, 2020. "Agricultural soft budget constraints in new European Union member states," Journal of Institutional Economics, Cambridge University Press, vol. 16(1), pages 49-64, February.
    • Handle: RePEc:cup:jinsec:v:16:y:2020:i:1:p:49-64_5
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    Cited by:

    1. Krzysztof Firlej & Sebastian Kubala, 2021. "The Financial Determinants of Investment Level Based on the Direction of Production of Agricultural Enterprises in the European Union," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 140-152.

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