Subsistence Agriculture in Transition Economies: its Roles and Determinants

Abstract

In line with recent suggestions about the potential positive effects of subsistence agriculture in fragile economies, this paper discusses and explains the effects of subsistence agriculture with emphasis on transition countries. Some micro-economic models of subsistence agriculture are reviewed and a two-stage decision model, combining risk aversion and transaction costs explanations for subsistence is put forward. The role of subsistence agriculture is addressed in terms of a static comparison to a commercial only agriculture. It is shown that, under some conditions, subsistence can play a stabilising role and have positive impacts on total agriculture. Employing the concept of a subsistence level of consumption, the paper demonstrates that these static effects can be valid in a dynamic perspective, provided additional conditions are met. Policy recommendations and a future research agenda with regard to possible agricultural commercialisation are drawn from the analysis.