Credit Market Imperfections and the Distribution of Policy Rents |
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| Authors: | Pavel Ciaian and Johan FM Swinnen |
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| Institution: | Pavel Ciaian is a researcher at the IPTS-JRC European Commission and associated researcher at the LICOS Centre for Institutions and Economic Performance at the University of Leuven (KUL). Johan F.M. Swinnen is professor of Economics and Director of the LICOS Centre for Institutions and Economic Performance at the University of Leuven (KUL) and Senior Research Fellow at the Center for European Policy Studies (CEPS) in Brussels. |
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| Abstract: | This article shows that credit market imperfections have important implications for the distribution of policy rents. In a model with land as fixed factor and credit market imperfections, when an area payment is given, land rents go up by more than the subsidy. On aggregate farms may lose from the subsidy. The results depend on the extent to which subsidies have direct and indirect effects on the credit constraints, on whether farms rent or own land, and on farm heterogeneity. |
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| Keywords: | agricultural policy imperfect credit markets policy rents |
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