Financial constraints and output targets in Russian agricultural production

Abstract

Since the breakup of the Soviet Union, Russian agricultural production has experienced a significant decline. The rise in input prices relative to output prices and the lack of legal mechanisms to provide land as a collateral for loans suggest the existence of expenditure constraints. We test for expenditure constraints and prevalence of output-targeting as sources of inefficiency in addition to actual inefficiencies in 73 Russian farm regions (oblasts). Only six oblasts are overall efficient and the rest experienced profit losses from all three sources of inefficiency of up to 35.8 per cent. We find that 54 oblasts are subject to expenditure constraints, while output-targeting is still practised by 14 oblasts. Our results suggest that one-seventh of the overall inefficiency, and thus profit losses, is due to both financial constraints and output-targeting. Copyright © 2000 John Wiley & Sons, Ltd.