Well functioning factor markets are a crucial condition for the competitiveness and growth of agriculture and for rural development.
Rural capital market
In addition to collecting and processing information to develop a comparative analysis of rural capital markets, the Factor Markets project will contribute to new insights on several aspects and issues related to EU rural capital markets:
- Analyse supply constraints in EU rural finance. In order to understand the drivers and impacts of the supply side constraints of rural capital in the EU, the Factor Markets project will empirically investigate the causes and impacts of credit constraints in agriculture across the EU member states.
- Study the demand side of rural capital markets and how its characteristics affect farm investment. The Factor Markets project will analyse farm investment decisions by considering that, while making their production and investment choices, farms face uncertainty and part of the investment is sunk.
- In order to have a good understanding of these capital markets and their effects on structural change and investment, as well as the interaction with the CAP the Factor Markets project will account for the farm heterogeneity in the EU-27, not just in terms of structure, size and productivity but also in terms of financial structure.
- To understand the functioning of the EU rural capital markets and its effects, the Factor Markers project will contribute to a better understanding of the extent to which (rural) capital markets are integrated across the EU.
- Another contribution of the Factor Markets project in this area is by studying the role of factor complementarity of farm investment in EU agriculture.
- Theoretical and empirical analysis will also be undertaken to examine the interaction between CAP payments, credit constraints and farm investments.
- In addition to studying the direct effects of subsidies and horizontal market integration across the EU, the Factor Markets project will contribute by investigating the relationship between farm credit, subsidies, and vertical integration in the EU.
- For the Factor Markets project, a set of existing models of European agriculture (LEITAP, CAPRI and AgriPoliS) will be further developed as a major integrative and innovative component of the study.