International Agricultural Productivity Growth: is there a consistent pattern across the methods?

Productivity Analysis,

The Determinants of Dairy Farming Competitiveness in Ukraine

WTO accession and the expected free trade agreement with the EU pose significant challenges for Ukrainian agriculture, implying structural changes for the sector as well as adaptations at the farm level to improve efficiency and competitiveness. However, a recent study by von Cramon-Taubadel and Nivievskyi [2] demonstrates a clear lack of competitiveness. This directs attention to the forces that drive competitiveness in Ukrainian agriculture. Dairy farming deserves particular attention in this regard, since it is one of the main income generating sources for the rural population, and of raw material supply for the fast growing dairy processing. In this paper at first we analyze the profile of competitiveness of dairy farming in Ukraine, demonstrating that only about 20% of dairy farms produce at competitive level. Then using a fixed-effect panel regression we analyze the determinants of competitiveness in Ukrainian dairy farming. The size of the farm, productivity and labor intensity have a strong positive effect on competitiveness, while arable land per head has negative effect. Finally, total subsidies received by farms are found to have a negative impact on competitiveness, and this impact does not differ significantly between farms with different herd size.Dairy, Ukraine, Competitiveness, Livestock Production/Industries,

Assessing the role of small farmers and households in agriculture and the rural economy and measures to support their sustainable development

The Ministry of Economy has an interest and demand in exploring how to increase the set of [legally registered] small family farmers in Ukraine and to examine more in details measures that could reduce the scale of the shadow agricultural market in Ukraine. Building upon the above political economy background and demand, we will be undertaking the analysis along the two separate but not totally independents streams of analysis, i.e. sustainable small scale (family) farming development and exploring the scale and measures for reducing the shadow agricultural market in UkraineComment: This publication was commissioned and produced within the framework of the Project Support to Agricultural and Food Policy Implementation in Ukraine (SAFPI), with the financial support of the European Union. Its contents are the sole responsibility of the Project and do not necessarily reflect the views of the European Unio

A Note on Technical Efficiency, Productivity Growth and Competitiveness

‘Productivity and efficiency growth enhances competitiveness’. Similarly formulated statements are common in the literature on the economic performance of firms, industries and nations. This conventional perception in the economic literature, originating from trade and growth theory models, however, lacks a clearly defined mathematical formulation. Earlier work by Page (1980) and Nishimizu and Page (1986) provides an elegant formalization of the relationship between the productivity growth and competitiveness measured by the Domestic Resource Costs (DRC) ratio. However, the relationship between technical efficiency and competitiveness has not been addressed in the literature. Moreover, the DRC is a biased measure of competitiveness. We propose static and dynamic decompositions of competitiveness measured by the unbiased Social Cost Benefit Ratio (SCB) indicator using a distance function approach, and demonstrate these decompositions using simulated data. These decompositions extend earlier work to formalize the relationship between technical efficiency, productivity and competitiveness, and demonstrate that competitiveness is also influenced by other factors that can override the effects of efficiency or productivity improvements.Agribusiness,

Agricultural Policy in Ukraine

Building upon the theory and methodology of agricultural policy developed in the previous chapter, in Chapter 2 we analyse and assess agricultural policy making in Ukraine since the breakup of Soviet Union till today. Going from top down to the bottom, we begin by describing the evolution of state policy in the agri-food sector. In the beginning, we describe the major milestones of agricultural policy making since independence, paving the way to the political economy of the modern agricultural policy in Ukraine. Then we describe the role of agri-food sector in the national economy as well as globally in ensuring food security in the world. After, we dig deeper and focus on a detailed performance of agricultural sector by looking at farm structures, their land use, overall and sector-wise untapped productivity potential. Modern agricultural policy and institutional set-up is contained and analyzed in details in the section 2.4. A review of the agricultural up- and downstream sectors wraps up this chapterComment: English version of the Chapter 2 in the Textbook of Kvasha, S., A.Dibrova, O. Nivievskyi, and P. Martyshev (2022). Agricultural policy. NUBiP, Kyi

Agglomeration Economies in Ukrainian Dairy Sector: a Marked Point Process Approach

Even after more than 15 years of transition from plan to market, agriculture in Ukraine still faces many challenges in terms of its structure. The evidence in the literature points to significant heterogeneity of technical efficiency and productivity scores in Ukraine. Moreover, both the recently approved WTO accession, and the ongoing negotiations on a free trade agreement with the EU will require further improvements in productivity and competitiveness at the farm level. Using farm-level data for 2004-2005, we study the presence and possible causes of agglomeration economies in Ukrainian dairy sector. One of the most important results is that there are agglomeration effects in the sector. The performance of dairy farms is influenced by the performance of its neighbors. Furthermore, the dairy farms in the neighborhood of a dairy processor outperform the more distant ones, although the heterogeneity of this effect is substantial.Ukraine, dairy farming, order-m frontier, spatial dependence, agglomeration., Agribusiness, Agricultural and Food Policy, Community/Rural/Urban Development, Food Consumption/Nutrition/Food Safety, Labor and Human Capital,

Non-refunding of VAT to soybean exporters or economic impact of Soybean amendments

Exempting soybean and rapeseed exporters from VAT has a negative effect on the economy of $\$$44.5-60.5 million per year. The implemented policy aimed to increase the processing of soybeans and rapeseed by Ukrainian plants. As a result, the processors received $\$$26 million and the state budget gained $\$$2-18 million. However, soybean farmers, mostly small and medium-sized, received $ 88.5 million in losses, far outweighing the benefits of processors and the state budget.Comment: available in Ukrainian onl

Biophysical Impact of Sunflower Crop Rotation on Agricultural Fields

Crop rotation is an important determining factor of crop productivity. Sustainable agriculture requires correct rules of crop rotation. Failure to comply with these rules can lead to deterioration of soil biochemical characteristics and land degradation. In Ukraine as well as in many other countries, sunflower monocropping is common practice and the impact of this fact should be studied to find the most precise rules to save the economic potential of land and minimize land degradation factors. This research provides an evaluation of the sunflower monocropping effect on the vegetation indices obtained from MODIS vegetation indices datasets for Ukraine as one of the countries with the biggest sunflower export in Europe. The crop rotation schemes are represented by their area proportions at the village level calculated based on the crop classification maps for 2016 to 2020. This representation gives the possibility to use regression models and f-test feature importance analysis to measure the impact of 3-year and 5-year crop rotation sequences. For these purposes, we use several models: a four-year binary representation model (model A1) and a model with all possible three-year crop rotation scheme representations (model B). These models gave the possibility to evaluate crop rotation schemes based on their biophysical impact on the next sunflower plantings and found that sunflower planting with an interval of three or more years is optimal in terms of the sustainability of soil fertility

How Effective is the Invisible Hand? Agricultural and Food Markets in Central and Eastern Europe

Since the seminal work of Adam Smith, markets have been considered an efficient tool for co-ordinating the behaviour of economic agents. The basic characteristic of a market economy is that the complex system of interaction among individuals is not centrally coordinated. Under the assumption of profit and utility maximisation (and a whole set of assumptions about the institutional framework), relative prices and their change over time provide the signals that guide, like an invisible hand, the allocation of resources, i.e., the structure of production and the intensity of input use in the various production processes. They do this by co-ordinating the activities of economic agents, i.e., of resource owners, producers, intermediaries, traders, and consumers. After system change in the former Soviet Union and in Central and Eastern Europe (CEE) central economic planning had to be replaced by other forms of co-ordination. The general direction in all transition countries was towards a market economy, but the speed and depth of reforms towards an environment in which markets can evolve differed largely between countries, sectors and between different phases during the past 15 years. IAMO Forum 2005 focuses on this development and discusses the functioning of markets, the requirements for this, and the advantages and disadvantages of other co-ordination mechanisms under different environments in the agricultural and food sectors in Central and Eastern Europe. CEE agri-food markets deserve researchers' and policy makers' attention for several reasons. Two of them regard the high demand for support to policy decisions that aim to stimulate economic and social development in the region. In most CEE countries, the significance of the agricultural and food sector is relatively high with respect to income and employment. In particular, rural areas can benefit from the development of this branch of the economy. Also, there is marked indication that agri-food markets in CEE are not ensuring exchange as frictionless as possible. This means that large benefits can be expected if potential improvements of the economic environment are implemented and if individual agents adapt optimally to that environment. Another motivation for economic research on transition countries is that we are looking at a huge region that started almost as a vacuum with regard to institutional settings. This means that a wide range of substantially different settings were introduced in the respective countries, and were only weakly confined by political rigidities or path dependencies. From a distant perspective, the repeated fundamental shifts in recent economic policies almost evoke the impression of a trial and error approach. The consequences of distinctively different options (across countries and periods) can be observed in a way almost similar to a laboratory situation. Such unique opportunity has attracted economists, particularly those interested in institutional economics, to conduct research on CEE. However, this also means that the experiences made in CEEC can enhance the general understanding of what markets can do and what the limitations of market coordination are. This volume contains selected contributions presented at IAMO Forum 2005 and gives an overview of the major topics discussed there. Partial analyses of specific economic problems usually abstract from the general economic framework which is assumed to be more or less constant as expressed in ceteris paribus clauses. Oftentimes, the set of institutional conditions is even assumed to be sufficiently well-described by the framework used in neoclassical models. Particularly for transition countries, this has frequently led to spurious results because crucial aspects of the framework actually in place were not considered, and sometimes were not even thought of. An extreme and very obvious example is the neglect of the effects of the replacement of monetary by nonmonetary exchange in phases of a barter economy. There is no generic approach to avoid unintended omission of crucial framework conditions, but it must generally be emphasised that a broad look at the various interdependent markets and at the entire socioeconomic context of a country is needed before going into detail. Descriptive analyses of the situation in various markets form part of such a broad look. The contributions of POPP, FERTÃ et al., WILKIN et al., and HEIN in the chapter Selected analyses from CEEC provide excellent examples, and focus on market developments in new EU member countries. On the one hand, the papers show the heterogeneity of problems e.g. due to largely differing farm structures. On the other hand, several common patterns can be observed: The market shares and power of large processors and retailers (hypermarkets, etc.) are increasing. Also, international (especially intra-EU) trade in commodities has increased in response to CAP-induced price harmonisation. Both tendencies weaken the market position of farmers, particularly small entities which cannot supply in volumes sufficient for large processing and trade firms. Within the food industry concentration increased as many smaller firms could not comply with EU processing standards and had to quit the market. The increased size and specialization of large producers, as well as of large processors, made many of those firms co-ordinate business with each other through long-term contractual agreements rather than by relying on spot markets. This tendency is very distinct in the fruit and vegetable sector, as WILKINâs contribution describes. Two contributions draw attention to the institutional framework itself, mainly by looking at circumstances which prevent market allocation from leading to an optimal outcome. HOBBS describes factors that impede investment and growth by drawing on transaction cost economics. Situations typical for transition countries are highlighted where e.g. transparency is not sufficient or the existence and reliable enforcement of contract or corporate law are not guaranteed. NUPPENAU stresses the need for the appropriate and precise formulation of land property rights, which should evoke a balance between governance and exclusion. The importance of appropriate and reliable institutions to avoid flaws is emphasised. But even with suitable institutions, transaction costs cannot be reduced to zero. The main reason for this is that since agents may gain form a head start of information, incentives to reveal their knowledge are quite restricted. Furthermore, some of the information required to make correct decisions is not available. This especially concerns information regarding all future contingencies. An uncertain future and the asymmetric distribution of information impose special problems when decisions have long-term effects and agents are linked together through investment decisions. This offers possibilities for opportunistic behaviour, i.e., when an agent behaves in a way that allows him to extract rents from the partners' activities. The friction induced in such situations may result in a market outcome that is biased by transaction costs. Mitigating this bias should be a goal of public policy but it is also in the interest of (at least some of the) private agents involved. This issue is discussed in more detail in the papers dealing with alternative governance structures. A number of contributions to IAMO Forum highlight approaches for measuring the well-functioning of markets. While studies that aim to directly measure transaction costs are very rare and are necessarily limited to comparing only very specific portions of transaction costs, most studies focus on indirect indicators. These usually start from the idea that in a well-functioning, competitive market any supply or demand shocks are reflected in price changes, not only in the particular market where the shock occurs but also in other, related markets, i.e., in different locations or at different stages of the production and marketing chain. Consequently, an approach for assessing the functioning of markets is to compare price differentials with processing-, marketing- or transfer-costs, or â since these costs are usually difficult to quantify â to observe price differentials over time. Accepting the assumption that the costs reflected by price differentials are more or less constant (or stationary) over the observed time span, any additional price changes or a lack of price co-movement is interpreted as an indication for insufficiently connected or insufficiently functioning markets. Three contributions in the chapter Analytical approaches for measuring market efficiency describe analyses which mainly focus on the vertical dimension, i.e., between market stages. BOJNEC, in his descriptive price analysis for several agricultural products in Slovenia since 1991, finds a heterogeneous development of the farm gate/consumer price spread: The processing and marketing margins increased for wheat and beef while they declined for grapes (processed to wine), sugar and poultry. BRÃMMER and ZORYA, as well as BAKUCS and FERTÃ, use cointegration analysis to describe the degree and nature of vertical price integration in the Ukrainian wheat market and the Hungarian pork market, respectively. Both studies find that price changes are transmitted vertically, that there is a tendency to "correct" any deviations from some underlying equilibrium price-relationship. However, such error correction mechanisms are found not to be a constant, universal force. In the Hungarian paper, it could only be found for a sub-period of the observed time span, excluding the highly volatile early 1990s. Also, equilibrium was found to be achieved by adjustment of farm gate prices only while the retail prices were found to be exogenous, i.e., not responding to any disequilibrium. The paper on Ukraine shows that adjustment processes between wheat and wheat flour prices cannot be sufficiently described by a constant error correction mechanism for the period 2000 to 2004. In fact, four different regimes of adjustment processes were found to have been in force, reflecting particular phases of largely differing market situations and political interventions. The functioning of markets depends on several crucial conditions. One of these conditions concerns the availability of information. Only if agents have perfect and complete information will the exchange lead to an outcome in which no individual can be better off without reducing the welfare of others. However, in the real world this condition regarding information is not fulfilled. Information is not perfect, since the future cannot be predicted with certainty. Incomplete information results from, first, not all information being revealed, and second, individuals not possessing the mental capacity to collect and process all information. Moreover, because of its asymmetric distribution, information can be regarded as a resource that can be exploited by agents. This means that there are incentives to hamper the diffusion of information to the public domain. In general, the more uncertain the future is and the more information is tacit, the worse markets will function, and the more beneficial become alternative mechanisms of coordination. Three papers dealing with this issue of organisational choice. HANF focuses on governance structures within supply chain networks that are appropriate for allowing an optimal flow of information between the involved individuals while retaining the necessary hierarchy for efficient implementation of strategic decisions. MAACKâs analysis shows that there is strong mutual interest between producers and processors of berry fruits to reduce marketing and procurement risk, respectively. This can be achieved by switching from spot market exchange to contractual supply agreements. A prerequisite for such agreements is that a well-balanced distribution of risks and risk premiums between the farmer and processor is implemented. This means that processors, who â facing a multitude of small producers â are used to opportunities for exerting market power, have to agree to cover part of the production risk through appropriate contractual clauses. Finally, BALINT looks at the various marketing channels used by Romanian farmers and finds that a self-enforcing dualism exists. For commercially-oriented farmers who can supply large quantities, marketing directly to traders, wholesalers and processors is most favourable and involves relatively low transaction costs. Although this form of supply-relationship is usually not based on contractual agreements, it can still be characterised by a certain stability over time. In contrast, small farmers whose production does not considerably exceed the subsistence level incur relatively high (per unit) transaction costs in selling their produce on local markets and to other farmers. Another aspect of organisational choice is the question of whether ownership of production factors is transferred or only the right to use them temporarily. The uncertainty of future developments implies that the possession of resources cannot be only regarded from the point of view of income generation at a certain point in time. With perfect foresight, there is no difference whether a factor is rented or purchased, because the remuneration would be the same. This perfect substitutability is no longer given when the future is uncertain. Income generation, then, is only one feature of ownership. Additional aspects such as insurance, wealth, and speculation as motivations for possession affect the value of ownership and thus shift the demand and supply curves of the factor. HURRELMAN picks up this issue in her analysis of the Polish land market and shows the impact of additional grounds for valuing property on the decision to rent or to buy land. Uncertainty may also affect the specialization of factor use. Allocating a factor of production to different production activities reduces the risk of income instabilities, but at the cost of specialization gains through economics of scale. Moreover, the decision on income combination is â besides risk â affected by a complex interaction of other determinants. GLAUBEN et al., analyse these interactions for the case of part-time farming in China and show how the decision of income combination is affected by household characteristics, human capital and other variables. Incomplete and imperfect information not only causes individuals to choose optimal governance modes, often it is also understood as a call for government intervention. The selected papers in the chapter on policy intervention plead for careful selection and coherent implementation of policy instruments. BENNER, as well as KUHN, highlight the significance of information diffusion and argue in favour of government intervention in this area. However, both emphasise that these interferences should be used carefully and be adjusted to specific market failures. Both argue that setting up information systems would improve the functioning of markets. BENNER also discusses possible negative impacts if governments that engage in setting up and enforcing product and process standards try, at the same time, to foster a sector like agriculture through support in marketing. The latter activity affects the governmentâs (crucial) credibility in the first activity. KUHN points to negative welfare effects and budgetary requirements of an intervention system which is implemented to increase price stability. Moreover, when a government intervenes in market allocation or intends to provide rules that should facilitate the exchange on markets, it has to take into account that the new regulation has to be implemented in a coherent manner. This requires the various policy regulations and institutional settings to be complementary and not cause frictions which hamper the functioning of the system. LERMAN and SHAGAIDA highlight this aspect in their discussion of the Russian land market, where bureaucracy and high costs for the registration of property rights can be regarded as a major cause of the low number of land transactions. However, since economic activities take place in a dynamic environment, the comparative static point of view may lead to inappropriate policy formulation. WANDEL discusses this aspect in the context of competition policy. From a comparative static point of view, market power has to be assessed negatively because of the distortions of resource allocation. However, monopoly profits are an indicator of extra rents and thus provide incentives for market entry. On the one hand, this thread may lead to special pricing schemes and/or to the accelerated development of technological change so that a monopolist can consolidate its market position. But it is possible, on the other hand, that market entry may in fact happen. In this case, one would observe structural change, which would be accompanied by an improved use of resources. This in turn means that competition policy should not be oriented towards an optimal market structure but towards the facilitation of market entry so that competition can discover market opportunities and determine the optimal structure of the market. The present volume shows the wide range of interesting and controversial topics that are concerned when looking at co-ordination, particularly on markets in CEE agri-food sectors. It remains a hope that the heterogeneity and dynamics of the developments will decrease as successful constellations of framework conditions, organisational choices and individual behaviour become more and more obvious and widespread in the region. Conversion to sustainable, balanced patterns might take place, but this cannot be taken for granted. However, chances for such development are better the more stable and balanced political developments, as well as international co-operation, become. We hope that the academic community will contribute towards such goal.Agribusiness, Community/Rural/Urban Development, Industrial Organization, International Development, Labor and Human Capital, Land Economics/Use, Political Economy,