Farm investment, credit rationing, and governmentally promoted credit access in Poland: a cross-sectional analysis

The aim of this paper is to empirically analyse the effects of governmentally promoted credit access on the investment behaviour of credit-rationed farmers in Poland. This is done by an econometric analysis of cross-sectional Polish farm household data. A Probit analysis revealed that the reputation of the borrower, but not the availability of land as collateral, had an effect of credit rationing. The estimates of an investment equation suggest that access to subsidised credit has a statistically significant role in determining investment behaviour of farmers. In various specifications of the credit-investment relationship, the average marginal effect of credit on investment was smaller than one, which implies that credit is partly used for purposes other than productive investment. Furthermore, investment volume is negatively related to farm size. A governmental policy which aims to promote productive investment should emphasise lending in larger amounts without discriminating against small farms. (C) 2004 Elsevier Ltd. All rights reserved.