How financial constraints distort farm investment behaviour and regional development: a comparative analysis of four European regions

This paper investigates the impacts of financial constraints on the structural development of four European regions. The spatial-dynamic agent-based model used considers individual farms’ investment behaviour while those indirectly interact via land rental markets. Scenarios with different interest rates for borrowed capital and levels of credit restrictions are tested. Results show that higher interest rates slow down the development of otherwise expanding production branches whereas credit restrictions force farms to choose small and cheap investments. Income losses in both cases are compensated by lower rental prices. Impacts on structural change differ considering regional initial situations and their characteristics.