Agriculture in Transition: Land Policies and Evolving Farm Structures in Post-Soviet Countries.

Meurs, Mieke

Agriculture in Transition: Land Policies and Evolving Farm Structures in Post-Soviet Countries Zvi Lerman, Csaba Csaki and Gershon Feder Lexington Books: Lanham, MD, 2004.

Written by three specialists with long connections to the World Bank, this book brings together very extensive data on agriculture and land policies in 22 transition economies. The authors' main point is dearly laid out in the introduction: 'Our analysis leads to a clear conclusion: despite the common heritage, the common starting point, and the common aspirations for a transition to a more efficient economic system, the transition countries adopted different implementation strategies for their land reform and farm restructuring programs.' More interesting is the effort of the authors to evaluate which countries have really done market-oriented restructuring and what the impact of such restructuring has been.

Lerman, Csaki, and Feder set up the issue by reviewing evidence on the poor performance of the large, socialist farms. Although I am not a fan of undemocratic socialist collective farms or their undemocratic, post-socialist corporate form, I found the claim of inefficiency poorly supported. The authors point to three kinds of evidence. First, they argue that socialist farms suffered from the wrong input mix, and the authors show interesting data on the significant differences in factor intensities in socialist and western farms. But this comparison alone does not show that the mix was wrong, as it does not account for underlying differences in factor prices (as the authors note in a following paragraph). Second, they present data from partial productivity analyses of Western and socialist farms. But if the countries had different factor intensities, we need a total factor productivity analysis for comparison, and evidence here is limited. Finally, the authors offer evidence on the prevalence of producer price subsidies prior to 1992. But since input and output prices were set by the state, the need for subsides shows only something about state policy, not farm performance.

In fact, there exist few good studies of the relative efficiency of collectivised farms, and the studies that exist find somewhat mixed results. In a relatively recent book, for example, Frederic Pryor (1992) looks at total factor productivity growth in a number of countries for the period 1970-1987. He finds that average annual productivity growth varies widely, with some socialist countries outperforming capitalist countries at similar levels of development and finds that collectivisation of agriculture does not have a significant impact on total factor productivity growth in a cross-sectional regression. This, of course, does not mean that collective farms and related economic institutions were not in need of reform. But the specific needs that reform should address might be more carefully stated.

To evaluate the impact of the different restructuring paths, the authors provide the most detailed background I have seen on land policy development in CIS countries. Central and East European (CEE) information is better known, but is also presented nicely here. To facilitate comparison among countries with diverse policies, the authors develop a land policy index. Not surprisingly, the authors find a clear divide emerging, with CEE countries moving more definitively toward market-oriented restructuring and farming increasingly based on individual households. The CIS countries continue to pursue more mixed policies, and in many cases, large, corporate farms continue to dominate the countryside. To judge efficiency, the authors use the emergence of individual farming on the European-US model as a benchmark. When reformed farms approximate the current size, factor intensities, product mix, and other characteristics of average US and West European farms, the authors argue, we will know that they have been reformed along market-oriented lines. Using the European-US benchmark, the authors find most CIS countries fall short of expected adjustments.

The authors provide no clear justification for choosing this benchmark, however, and other successful adjustment outcomes seem possible. The European or US individual (or family) farms have resulted from a particular historical trajectory, where many people started with small farms, which were merged over the years into a much smaller number of larger, even very large, farms, at least in some crops. If farms in transition economies start as large, consolidated enterprises, this will likely generate different relative costs and benefits of various organisational adjustments (through a path dependency of transaction costs and relative prices). The size, factor intensities, and other characteristics of US and European farms have also been influenced by the long history of very extensive subsidies. If farms in former socialist countries do not expect to face this same set of (regulated) prices, this would certainly affect organisational form, especially since some US and European farm subsidies are precisely targeted toward preventing 'excessive,' market-driven, consolidation of family farms. In CEE countries, especially those slated to join the EU, one might expect convergence toward a West European benchmark. But in places like Russia or Kazakhstan, with their distinct starting points, physical geography, and price structures, it seems much less certain that market-orientation will necessarily produce something like European-US individual farming. Certainly some policy makers in the region continue to have other reform outcomes in mind.

Since large corporate farms persist in many countries, what is their impact on agricultural performance? Here the authors draw on a number of World Bank case studies and surveys that will be new to most readers, as well as secondary sources. These data can provide no definitive answer about the efficiency impact of restructuring, however. The farms chosen for restructuring may not be representative of all collective farms, and provinces chosen for case studies may not be representative of the whole country. With this in mind, Lerman, Csaki, and Feder develop a Stochastic Frontier Analysis to compare technical efficiency of individual and corporate farms in seven countries. They find no conclusive evidence that corporate farms are less or more efficient. This absence of clear productivity differences may be one reason why landholders hesitate to withdraw land from corporate farms. Other possible explanations are examined in the next chapter.

Since the efficiency analysis provides no strong evidence of the benefits of decollectivisation of farming, the authors examine a range of other evidence of the impact of different reform strategies. The authors compare the perceptions of individual farmers and corporate farm workers regarding their family's economic situation. They find that, compared to farm workers, individual farmers feel their situation better, more improved over previous periods, and more likely to continue to improve. Such simple bivariate correlations cannot be evidence of the impact of the restructuring itself. Quite probably, in my opinion, those who stay in corporate farms are older, less educated or otherwise different from those who leave corporate farms for individual farming. If these variables are not controlled for, the impact of farm restructuring may be greatly overstated.

Other efforts to use the limited data to evaluate the impact of restructuring suffer from similar problems. For example, the authors find a positive correlation between individualisation of farming and agricultural growth rates, and offer this as evidence of a positive impact. But the direction of causality is not known--perhaps it is reversed, as when, in a context of strong sectoral growth, farm workers see departure for individual farming as less risky. And again there is the problem with simple correlations. Might macroeconomic context not also be influencing outcomes? In Armenia, where individual farming is said to be driving efficiency improvements, only 28 percent of land is in individual use. Can what is happening on 28 percent of land really account for sectoral-level performance? We need a more precise measure to tell.

Overall, the book provides a helpful and handy reference on post-socialist agricultural policy in the region and the debates surrounding it, but many of its arguments are frustratingly underdeveloped. The analysis of the authors does not cover a lot of new ground, and in some places claims exceed the ability of the data to support them. Of course, the data continue to be inadequate for answering the many important questions that confront us. Even so, the authors' data, laid out systematically in tables and graphs, are certain to provide new information and insights to even seasoned researchers in the field. For those looking for a first overview of the issues, though, this book is ideal in offering both a broad overview and rich detail.

REFERENCES

Pryor, F. 1992: The red and the green: The rise and fall of collectivized agriculture in marxist regimes. Princeton University Press: Princeton, NJ.

Mieke Meurs

Department of Economics,

American University,

Washington, DC, USA

www.palgrave-journals.com/ces