A revival of large farms in Eastern Europe—how important are institutions?

Abstract

AbstractContrary to expectations, large farms are still the dominant form of farm organization in most countries of the Commonwealth of Independent States and are important in some Central and Eastern countries. This paper analyzes the reasons for these failed expectations, focusing on the experience of Russia. The framework of institutional economics is applied to explain the reasons why the conventional approach, based on economies of scale and on‐farm transaction costs, does not apply to the evolution of farm size in the east (and even the west). Specific institutions, which are partly embedded and informal, and legal, but loosely enforced, suppress the birth of family farms in Russia and stimulate the growth of large farms, leading to holdings that are not observed in developed market economies. Hence, survival and growth of large farms are not necessarily based on comparative advantage of these farm organizations in a market economy environment.