The Economics of Agricultural Decollectivization in East Central Europe and the Former Soviet Union

Abstract

1989 include both the privatization of agricultural production assets and the restructuring of state and collective farms. Farm restructuring and, more specifically, the breakup of large-scale agricultural production units into individually operated farms—a process we define as ‘‘decollectivization’’—differ considerably for the various ECE and FSU countries. Differences in decollectivization can be observed across countries, between regions within a country, and over time. We argue that these differences are not random. This article identifies the factors that affect the decollectivization process and shows how they are consistent with empirically observed differences in agricultural decollectivization in ECE and FSU countries. The decollectivization process is a consequence of the decision of collective farm members to leave the collective production framework and start up individual farms. Factors affecting this decision are the expected productivity and profitability of individual farming relative to collective farming and the costs for individuals to leave the collective farm and start up an individual farm. These costs are affected by land reform, privatization, and decollectivization regulations. The relative productivity of individual versus collective farming depends on the distribution of collective farmers’ productivity, the prereform average collective farm productivity, and the advantages and disadvantages of individual farming compared to collective farming. The literature on decollectivization identifies both advantages and disadvantages in collective production, some of which would not extend beyond the transition period. Disadvantages include high transaction costs associated with the monitoring of labor and inefficiencies due to the right of