Johan Swinnen

The Economics of Agricultural Decollectivization in East Central Europe and the Former Soviet Union

1989 include both the privatization of agricultural production assets and the restructuring of state and collective farms. Farm restructuring and, more specifically, the breakup of large-scale agricultural production units into individually operated farms—a process we define as ‘‘decollectivization’’—differ considerably for the various ECE and FSU countries. Differences in decollectivization can be observed across countries, between regions within a country, and over time. We argue that these differences are not random. This article identifies the factors that affect the decollectivization process and shows how they are consistent with empirically observed differences in agricultural decollectivization in ECE and FSU countries. The decollectivization process is a consequence of the decision of collective farm members to leave the collective production framework and start up individual farms. Factors affecting this decision are the expected productivity and profitability of individual farming relative to collective farming and the costs for individuals to leave the collective farm and start up an individual farm. These costs are affected by land reform, privatization, and decollectivization regulations. The relative productivity of individual versus collective farming depends on the distribution of collective farmers’ productivity, the prereform average collective farm productivity, and the advantages and disadvantages of individual farming compared to collective farming. The literature on decollectivization identifies both advantages and disadvantages in collective production, some of which would not extend beyond the transition period. Disadvantages include high transaction costs associated with the monitoring of labor and inefficiencies due to the right of

AGRICULTURAL CREDIT PROBLEMS AND POLICIES DURING THE TRANSITION TO A MARKET ECONOMY IN CENTRAL AND EASTERN EUROPE

Abstract This paper assesses the problems of financing Central and Eastern European agriculture during the present transitionary period and the role of government in this process. Initially the paper looks at why credit markets work imperfectly, even in well developed market economies, focusing on problems related to asymmetric information, adverse selection, moral hazard, credit rationing, optimal debt instrument choice and initial wealth. It shows why these and related problems may cause transaction costs to be so high that credit rationing and high interest rates are rational and efficient responses by lenders to the imperfect information problems of the agricultural sector. A series of specific, transition-related issues are then discussed which have worsened these problems within the Central and Eastern European agricultural sector. The potential roles of governments in solving these issues and actual observed interventions by Central and Eastern Europe governments through credit subsidies, loan guarantees and specialised agricultural lending institutions are analysed. Finally, the paper discusses how financial market innovations have solved some of the credit market problems and derives the implications for government policies.

Land Market Imperfections and Agricultural Policy Impacts in the New EU Member States: A Partial Equilibrium Analysis

This article analyses how transaction costs and imperfect competition in the land market affect the welfare effects of agricultural subsidies in the new Eastern Member States of the European Union. Benefits of land subsidies end up with landowners in new Eastern Member States also with imperfections in the new Eastern Member States land markets. With unequal access to subsidies, small tenant farmers may even lose out from the subsidies. Decoupling of payments shifts policy rents to farmers, but constrains productivity-enhancing restructuring. Using reserve entitlements to mitigate this effect reduces the intended benefits on distortions and target efficiency.

Private Enforcement Capital and Contract Enforcement in Transition Economies

The enforcement of contracts is necessary for efficient exchange and investment in economic activities. There are many situations where public institutions are ineffective in enforcing contracts. This is the case in economies in transition where public enforcement institutions themselves are being reformed. Under such conditions private mechanisms could enforce contracts. “External” private enforcement is done by third parties, e.g., strong-arm private agents. Although such enforcement may be effective, it may have unwanted externalities. Alternatively, “internal” private enforcement can be done through the use of so-called private enforcement capital, i.e., private losses that result from breaching the contract. These losses result directly from contract termination, or non-renewal, and indirectly from reputational damage. By designing contracts such that these private losses from contract breach outweigh potential benefits, contracts can be made “self-enforcing.” In this article we first present a conceptual framework to interpret contracts and to analyze how the use of private enforcement capital can enforce contracts. Then we illustrate such (internal) private contract enforcement mechanisms with several case study examples of agri-business contracting in transition countries where public enforcement fails.

The political economy of land reform choices in Central and Eastern Europe

In all Central and Eastern European countries (CEECs) land reform has been a key part of the overall agrarian reforms and land reform procedures differ significantly among CEECs. This paper, by focusing on distributional effects and political economy implications, explains why thirteen CEEC governments chose particular reform procedures. Key factors in their choices are the history of the land ownership, including the post‐collectivization ownership status, length of Communist rule, the ethnicity of pre‐collectivization owners, and the equality of pre‐collectivization asset distribution. These factors influence the distributional consequences of the land reform, including the (potential) conflicts between efficiency, social equity, and historical justice, and thus the political economy equilibrium.

PRODUCTION ORGANIZATION AND EFFICIENCY DURING TRANSITION: AN EMPIRICAL ANALYSIS OF EAST GERMAN AGRICULTURE

Enterprise restructuring is expected to improve efficiency in transition economies. With data from former East Germany, we compare the efficiency of family farms and partnerships with large-scale successor organizations of the collective and state farms (LSOs). Using parametric and nonparametric techniques, we show that LSOs display lower technical efficiency than do family farms and partnerships but that this difference is small and declining during transition, mainly as a result of structural changes in agriculture. Family farms are not as scale efficient as partnerships and LSOs, and partnerships are superior to all other organizational forms.

A Positive Theory of Agricultural Protection

The present paper analyses the political economy of agricultural protection in a general equilibrium framework. Rational politicians offer protectionist policies in return for political support from their constituency. Individuals in the economy have different factor endowments. Politicians exploit these differences in establishing redistributive policies when maximizing political support. Changes in economic variables—such as the urban-rural income gap, capital intensity, the share of agriculture in total output and total employment, and the share of food in consumer expenditures—affect the political equilibrium policy. The analysis concludes that the observed correlation between economic development and agricultural protection is caused by a multiplicity of factors.

Patterns of Agrarian Transition

Karen MacoursUniversity of California, Berkeley, and Katholieke Universiteit LeuvenJohan F. M. SwinnenEuropean Commission and Katholieke Universiteit LeuvenI. IntroductionEconomic reforms have induced important output and productivity changesin the agricultural sectors of transition countries (TCs). There are, however,large differences between the countries in terms of the direction and themagnitude of these changes. For example, agricultural output increased con-siderably in the East Asian TCs, while there was a large output fall in theCentral and East European countries (CEECs) and the former Soviet Union(FSU) during transition (fig. 1).

Mimicry of a cellular low energy status blocks tumor cell anabolism and suppresses the malignant phenotype

Aggressive cancer cells typically show a high rate of energy-consuming anabolic processes driving the synthesis of lipids, proteins, and DNA. Here, we took advantage of the ability of the cell-permeable nucleoside 5-aminoimidazole-4-carboxamide (AICA) riboside to increase the intracellular levels of AICA ribotide, an AMP analogue, mimicking a low energy status of the cell. Treatment of cancer cells with AICA riboside impeded lipogenesis, decreased protein translation, and blocked DNA synthesis. Cells treated with AICA riboside stopped proliferating and lost their invasive properties and their ability to form colonies. When administered in vivo, AICA riboside attenuated the growth of MDA-MB-231 tumors in nude mice. These findings point toward a central tie between energy, anabolism, and cancer and suggest that the cellular energy sensing machinery in cancer cells is an exploitable target for cancer prevention and/or therapy.

Credit Market Imperfections and the Distribution of Policy Rents

This article shows that credit market imperfections have important implications for the distribution of policy rents. In a model with land as fixed factor and credit market imperfections, when an area payment is given, land rents go up by more than the subsidy. On aggregate farms may lose from the subsidy. The results depend on the extent to which subsidies have direct and indirect effects on the credit constraints, on whether farms rent or own land, and on farm heterogeneity.