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Farm Expansion in Lithuania after Accession to the EU: The Role of CAP Payments in Alleviating Potential Credit Constraints

Abstract The impact of the introduction of EU Single Area Payments (SAPs) on farm expansion strategy in Lithuania is investigated, utilising farm accounting and survey data. The introduction of the SAP has a positive influence on farmers' intentions to expand their area compared to a baseline scenario of the hypothetical continuation of pre-accession policy. The switch in policy has a more pronounced effect on farms that were previously credit constrained. While the SAP has been presented as a support that is decoupled from production, its introduction may have ex post coupled effects, through an income multiplier effect on credit constrained farmers.