The Structure of Agricultural Technology in Russia: A Multioutput Cost Function Approach

Abstract

Economic and institutional reforms implemented in Russia during the 1990s have had an immense impact on the country’s agricultural sector. The liberalization of trade and the move towards a market economy induced major adjustments in the production structure of Russian agriculture. This paper examines the effects of these adjustments on the productivity and performance of Russian agriculture in the period from 1999 to 2011. To account for considerable shifts in the agricultural output structure and factor use, a multioutput cost function formulation is employed. Our estimation results indicate substantial improvements in Russia’s agricultural productivity which were driven by labor and materials-using and capital-saving technical change. They also suggest the presence of economies of scale and economies of scope on Russian farms. While labor allocative inefficiencies were diminishing, capital turned to become a scarce factor on Russian farms. The paper concludes by deriving potential implications of the Russia’s policies of self-sufficiency and import-substitution.