Vertical coordination from the angle of farmer loyalty and access to credit. Evidence from the Polish dairy sector.

Numerous studies have shown that processing and retail industries have actively engaged in assisting farmers to join the modern food marketing systems. Data from the Polish dairy sector shows that assistance is provided not only for the traditional-channel farmers wishing to modernise, but also for farmers already included in the modern marketing channel. Drawing on the literature two explanations could be provided to account for this phenomenon: 1) even the modern-channel farmers lack sufficient funds to maintain required quality/quantity on their own; 2) after undertaking the necessary adjustments the modern-channel farmers are more likely to quit their relationship with current processor and turn elsewhere so the assistance is needed to prevent them from doing that. Basing on the household data, it is robustly found that these hypotheses could provide at most partial explanation for vertical linkages observed between modern-channel processors and farms. The present paper takes advantage of logit models, instrumental variables’ approach, panel data estimations as well as propensity score matching methods.vertical coordination, access to credit, farmer loyalty, dairy sector, Poland

Political competition and support for agriculture

This paper investigates whether political competition plays an important role in determining the level of agricultural protection. In order to do so, we exploit variation in political and economic data from 74 developing and developed countries for the post-war period. Our results robustly show that the level of agricultural distortions is the higher, the higher is the level of political competition. We show that political competition may importantly complement other institutional aspects in determining policy choices. We investigate the heterogeneous effects of political competition across different electoral rules (majoritarian vs. proportional), forms of government (coalition vs. single-party) and level of incomes. --Political competition,constitutional rules,agricultural distortions

Does it matter how much land your neighbour owns? The functioning of land markets in Poland from a social comparison perspective. Factor Markets Working Document No. 59, August 2013

While many factors have been studied in relation to the functioning of land markets, the role of land distribution has received relatively little attention. In this paper, we ask to what extent farmers’ propensity to buy land is related to the difference between them and their neighbours in terms of land ownership. To this end, we employ the concept of relative deprivation. Drawing on micro-level data from the transition period in Poland and using both OLS and instrumental variables strategy, we find that interpersonal comparisons with others in one’s reference group may have motivated a farmer’s behaviour in the land market. In particular, the propensity to purchase land is positively associated with experiencing higher relative deprivation. In addition, this relationship waned over time in a predictable manner: late in the transition period it was weaker than at the beginning of the period

Access to Credit, Factor Allocation and Farm Productivity: Evidence From the CEE Transition Economies

This paper analyses how farm access to credit affects farm input allocation and farm efficiency in the CEE transition countries. Drawing on a unique farm level panel data with 37,409 observations and employing a matching estimator we are able to control for the key source of endogeneity – unoberserved heterogeneity. We find that farms are credit constrained both in the short-run as well as in the long-run, but that credit constraint is asymmetric between inputs. Our estimates suggest that farm access to credit increases TFP up to 1.9% per 1000 EUR of additional credit. The use of variable inputs and capital investment increases up to 2.3% and 29%, respectively, per 1000 EUR of additional credit. Due to credit-financed investment in labour-saving farm equipment, labour use reduces for low level of credit. Farms are found not to be credit constrained with respect to land.access to credit, investment, factor allocation, productivity, transition countries

Returns from Income Strategies in Rural Poland. Factor Markets Working Document No. 64, August 2013

In order to stabilise and improve their income situation, rural households are strongly encouraged to diversify their activities both within and outside the agricultural sector. Often, however, this advice is only moderately pursued. This paper addresses issues of rural household income diversification in the case of Poland. It investigates returns from rural household income strategies using propensity score matching methods and extensive datasets spanning 1998-2008. Results suggest that returns from combining farm and off-farm activities were lower than returns from concentrating on farming or on self-employment outside agriculture. This differential is stable over time although returns from diversification have relatively improved after Poland’s accession to the EU. This is also visible in the fact that since 2006 returns from combining farm and off-farm activities have evened with returns from relying solely on hired off-farm labour, thus smoothing the difference observed before the accession. Further, over the analysed period, households pursuing the diversification strategy performed better than those relying solely on unearned income. Finally, in general, the income in households combining farm and off-farm activities was higher than in those combining two off-farm income sources

Productivity and Credit Constraints: Firm-Level Evidence from Propensity Score Matching. Factor Markets Working Paper No. 3, September 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. We find that farms are asymmetrically credit constrained with respect to inputs. Farm use of variable inputs and capital investment increases up to 2.3% and 29%, respectively, per €1,000 of additional credit. Our estimates also suggest that farm access to credit increases total factor productivity up to 1.9% per €1,000 of additional credit, indicating that an improvement in access to credit results in an adjustment in the relative input intensities on farms. This finding is further supported by a negative effect of better access to credit on labour, suggesting that these two are substitutes. Interestingly, farms are found not to be credit constrained with respect to land

Returns from income strategies in rural Poland

In Poland, rural households are encouraged to diversify their activities both in and outside the agricultural sector in order to stabilize and improve their income. However, relatively few households appear to do this. This paper addresses this issue, investigating the returns from the income strategies of rural households using propensity score matching methods and extensive data sets for 1998–2008. The results suggest that returns from combining farm and off-farm activities are lower than returns from specialization, namely, concentrating on either farming or off-farm activities. The income difference between farmers and those who combine farming and off-farm activities increased after Poland joined the European Union.Income diversification, rural areas, propensity score matching, Poland

Intra-European Union trade of dairy products

In this paper, we employ a novel, network analysis based approach to gain new insights with respect to the changes in the structure of intra-European Union (EU) milk product trade between 2001 and 2012. Several network indices are computed to assess the relative importance of the countries from a number of perspectives. The results emphasise that the trade network has become denser, yet its overall centralisation slightly decreased during the period. While the impacts of the 2004 EU enlargement are clearly visible, the effects of the 2008 financial crisis are less evident. Integration of countries that joined the EU in 2004 or 2007 (the so-called New Member States, NMS) is only partial, and depends on the category of milk product considered. Although the number of NMS trade relations increased constantly between 2001 and 2012, the relative importance of most of them did not change. A significant exception is Poland, which became one of the most important exporting countries

On structural change, the social stress of a farming population, and the political economy of farm support

A rationale for providing support to the farm sector in the course of economic development and structural change is a growing gap between the incomes of non-agricultural workers and the incomes of farmers. Drawing on a model that enables us to analyze the level of social stress experienced by farmers as employment shifts from the farm sector to other sectors, we find that even without an increasing gap between the incomes of non-agricultural workers and the incomes of farmers, support to farmers might be needed/can be justified. This result arises because under well-specified conditions, when the size of the farm population decreases, those who remain in farming experience increasing aggregate social stress. The increase is nonlinear: it is modest when the outflow from the farm sector is relatively small or when it is large, and it becomes more significant when the outflow is moderate. This finding can inform policymakers who seek to alleviate the social stress of the farming population as to the timing and intensity of that intervention