How Distorted Have Agricultural Incentives Become in Europe's Transition Economies?
Eastern European Economics
Over the past two decades, earnings from farming in the former communist countries of Eastern Europe and Central Asia have been altered hugely by government sectoral and trade policy reforms. This paper summarizes evidence on the changing extent of distortions to markets for farm products since the transition away from planned prices began. In particular, it examines the extent to which, following the initial shocks, there has been a gradual improvement in farmer incentives. This new evidence
... This new evidence is not inconsistent with that past pattern of earlier-developing countries, but the speed of assistance increase is relatively rapid and is linked with actual or desired accession to the European Union. The final section focuses on future prospects, and in particular on what might be done to avoid agricultural protection levels becoming excessive. Kyrgyz Republic and Tajikistan). Together these countries in 2000-04 accounted for 89 percent of the region's agricultural value added, 91 percent of its population and 95 percent of total GDP. 1 Some key characteristics of those economies are shown in table 1. The great diversity within the group of transition countries -in terms of relative resource endowments and comparative advantages, stages of development and transition, agricultural and trade policy regimes, and memberships of the EU, WTO, OECD and regional trading agreements -make the set of countries chosen a rich sample for comparative study. The central and eastern European countries that are now EU members differ substantially from the rest of the former Soviet Socialist Republics that are now members of the Commonwealth of Independent States (CIS), having a higher per capita income (threequarters of the global average, compared with one-third for the CIS) and a higher population density (0.7 times the global agricultural land per capita, compared with 2.7 times in the CIS). Analyses of politically feasible agricultural subsidy and trade policy reforms, or of policy options for coping with structural changes such as the boom in energy raw material prices in the mid-2000s that has intersectoral Dutch-disease effects, need to be based on a clear understanding of the recent and current extent of policy interventions and the politico-1 The other countries of the region include those that were the parts of former Yugoslavia and the other five former Soviet Republics.