Impact of debts and subsidies on agricultural production: farm-data evidence

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Abstract

This study used a production function approach and farm-level data from 19,000 Russian large-scale farms for the period 1995-2000 to analyse the impact of debts and subsidies on production. Regional differences and farm-specific characteristics were accounted for by using fixed-effect estimation. The results showed a negative relation between subsidy and production, implying the presence of soft budget constraints, and a positive relation between debts and production, suggesting that the more debts (to suppliers) the enterprise is able to generate, the more secure its production would be. The results indicated that such inputs as labour, land, livestock, capital and materials were overused. Russian agricultural enterprises tended to use labour intensive technologies.
Original languageEnglish
Pages (from-to)7-34
JournalQuarterly Journal of International Agriculture
Volume45
Issue number1
Publication statusPublished - 2006

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