FARM CONSUMPTION BEHAVIOR IN THE PRESENCE OF UNCERTAINTY AND RESTRICTIONS ON CREDIT

Farm consumption behavior has an important indirect role in determinin g the ability of farms to invest and grow. In this paper I examine the effect on farm consumption behavior of the presence of quantitative r estrictions on farm borrowing. Using a form of the life cycle model wh ich allows for both consumption and production by the household, the e ffect of borrowing restrictions on consumption behavior is tested econ ometrically for a sample of Dutch farm households. The results suggest that the life cycle model without borrowing restrictions is rejected by the data.