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Abstract:
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This paper documents a relationship between non-farm income (primarily
earnings and pensions) and agricultural outlays in Bulgaria, using the 2003
Multitopic Household Survey. The outcomes analyzed are expenditures on
working capital (variable inputs such as feed, seed, and herbicides) and
investment in livestock. I find that while non-farm income has no significant
effect on the probability of purchasing variable inputs, it does have an effect on
the amount spent if positive, with an estimated elasticity of 0.14. Non-farm
income also has an effect on the number of households that purchase farm
animals, with an estimated elasticity of 0.35. The use of non-farm income for
farm investment is consistent with the presence of credit constraints, as is the
fact that less than one per cent of farmers report outstanding debts for
agricultural purposes. Yet it is also noted that many farm households take out
large unsecured loans for other purposes, suggesting that a lack of demand for
agricultural borrowing may also be part of the problem. |