Economic transition and the decline of agricultural production in Estonia

Abstract

Agricultural production in Estonia has declined rapidly under economic transition since 1992, causing a number of undesirable social and economic problems. Rural unemployment has increased, so has the incidence of poverty. The country has changed from being a net exporter to a net importer of many major agricultural products over a short period of time. To understand the causes of agricultural decline, this paper uses a policy analysis matrix (PAM) to study the competitiveness and profitability of various agricultural, fishery and forest products for the period 1994–95. The results suggest that much of the loss of production may have been explained by economic reforms that were intended to eradicate market distortions created by the former Soviet system, but government's ‘non-interventionist’ policy and the rigidity of foreign exchange rate may have aggravated the situation. Copyright © 2005 John Wiley & Sons, Ltd.