The impact of non-farm income on the investment in agriculture: evidence from Hungary and Slovenia

Abstract

The article investigates the impact of non-farm income on the investment for Hungarian and Slovenian farms using FADN panel data for the years 2004-2008 and different econometric estimation approaches. We find that non-farm income is more important for Slovenian farms than for Hungarian farms. Farm gross investment is positively associated with real sales growth and cash flow implying the absence of soft budget constraint. Gross farm investment is negatively associated with non-farm income, but positively associated with investment subsidies. Specific results by country are found depending on growing vs. declining real sales and on farm indebtedness.non-farm income, farm investment, soft budget constraint, panel data analysis, Community/Rural/Urban Development, D81, D92, O12, Q12, C23,