PRODUCTION EFFICIENCY AND AGRICULTURAL REFORM IN UKRAINE

The profound changes in the centrally planned economies, including the Former Soviet Union (FSU), have resulted in an economic transition of unprecedented proportion. In these planned economies, production deci sions were made centrally, and distribution was largely organized thro ugh a fixed and artificial price system. The market transition in thes e nations has been accompanied by policy uncertainty and structural ad justment as governments have freed prices, introduced private property , and left production and distribution more to the forces of supply an d demand (Csaki). In general, the reforms have resulted in an initial sharp decline in production and consumption levels and in productivity (Stuart). For the nations of the FSU, adjustments in agriculture have been of particular importance because of the prominence of the sector , the share of population in rural areas, and the major roles of food and agricultural subsidies during the past regime. Input prices have i ncreased by an order of four compared to output prices (due to both co ntinuing state control and decreasing food demand) and have resulted i n declining output levels and farm incomes (ERS). In addition, high no minal interest rates, decreased farm income, and uncertainties about t he pace of the economic restructuring have reduced farm investment. Go vernments are introducing short-term adjustment policies to stabilize farm income and food production and longer-term initiatives to address privatization, antimonopoly, monetary and fiscal stabilization, trade , and the creation of markets. The restructuring and policy decisions in these formerly planned economies are occurring with little support from empirical analysis of the impacts of the reform process. Data hav e been limited, and few economists with access have had the opportunit y to produce the analysis required to inform difficult decisions on th e scope and sequencing of the economic reforms. For example, efficienc y analysis of agriculture has been limited to highly aggregated data ( Johnson and Brooks, Koopman). Analysis of detailed, farm-specific data available for Ukraine may yield insights on the reforms, the conditio n of agricultural enterprises or farms, and an improved basis for anti cipating the consequences of interventions whether designed to stabili ze the transition process or to support the longer-term restructuring of the sector.