Drivers of Agricultural Physical Capital Development: Theoretical Framework and Hypotheses. Factor Markets Working Paper No. 18, February 2012

This paper aims to identify drivers of physical capital adjustments in agriculture. It begins with a review of some of the most important theories and modelling approaches regarding firms’ adjustments of physical capital, ranging from output-based models to more recent approaches that consider irreversibility and uncertainty. Thereafter, it is suggested that determinants of physical capital adjustments in agriculture can be divided into three main groups, namely drivers related to: i) expected (risk-adjusted) profit, ii) expected societal benefits and costs and iii) expected private nonpecuniary benefits and costs. The discussion that follows focuses on the determinants belonging to the first group and covers aspects related to product market conditions, technological conditions, financial conditions and the role of firm structure and organization. Furthermore, the role of subjective beliefs is emphasized. The main part of this paper is concerned with the demand side of the physical capital market and one section also briefly discusses some aspects related to supply of farm assets.

Developments in the Agricultural and Rural Capital Market of the Former Yugoslav Republic of Macedonia. Factor Markets Working Paper No. 9, October 2011

The undeveloped rural capital market in the Former Yugoslav Republic of Macedonia is constrained by an urban–rural development gap, with limited capacities for rural development and imperfections in the rural capital market. Among the most striking hindrances are the illegal status of a large share of agricultural buildings and other real estate in rural areas, particularly on the individual family farms that prevail in the country, and the insufficient knowledge and abilities of individual farmers in applying for credit. National, EU and other donor funds are being used to improve knowledge, skills and other human resources, and to address the illegal status of buildings and facilities. In recent years, government support for agricultural, rural and regional development has been introduced to promote good agricultural practices, production and economic activity in rural areas. The elimination of imperfections and improvements to the functioning of the capital market – making access to credit and funds easier, especially for small-scale family farms and for rural development – are seen as measures contributing to agriculture and more balanced rural and regional development.