FARM HOUSEHOLD PRODUCTION IN THE PRESENCE OF RESTRICTIONS ON DEBT

THEORY AND POLICY IMPLICATIONS

Research output: Contribution to journalArticle

16 Citations (Scopus)

Abstract

In this paper a two period life cycle model of the farm household is constructed allowing for production and restrictions on debt in which the consumption and production decisions of the farm household are simultaneous. It is shown that the farm household's production responses to exogenous changes may be qualitatively different to that predicted by the profit‐maximising model when all markets are perfect. In particular, when the household is debt constrained, ‘perverse’ output effects are possible with output increasing in response to output price decreases. Further, for such households, compensation payments will have production effects. Finally, the financial situation of the farm has an impact on production for debt constrained farms.
Original languageEnglish
Pages (from-to)371-380
Number of pages10
JournalJournal of Agricultural Economics
DOIs
Publication statusPublished - 1995

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debt
households
farms
farm debt
Life Cycle Stages
Debt
Household production
Farm households
Policy implications
Farms
markets
Household
Farm

Cite this

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abstract = "In this paper a two period life cycle model of the farm household is constructed allowing for production and restrictions on debt in which the consumption and production decisions of the farm household are simultaneous. It is shown that the farm household's production responses to exogenous changes may be qualitatively different to that predicted by the profit‐maximising model when all markets are perfect. In particular, when the household is debt constrained, ‘perverse’ output effects are possible with output increasing in response to output price decreases. Further, for such households, compensation payments will have production effects. Finally, the financial situation of the farm has an impact on production for debt constrained farms.",
author = "E. Phimister",
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