Measuring success and identifying its determinants

Given these intriguing combinations of policies and performances that have unfolded during the first decade of transition in the agricultural sectors of the world's transition nations, we believe a renewed enquiry into the debate about the choice of the reforms and their impact on economic performance is due. The commonalities and differences of the nature of reform among East Asian, CEE, and the CIS nations and the subsequent productivity contours call for a careful comparative analysis. To do so, we turn to the literature, draw on our own work from over the years, and build an empirical picture of the policies and institutional shifts that triggered agricultural growth in some of the world's twenty-eight transition nations and led to stagnation in others. The lessons learned from the process of transition in the agrarian development of most of the formerly Socialist countries can inform policy makers and scholars about the choice of reform strategy, the constraints in making these choices, and the relationship between reform and economic growth.

Focusing on agriculture to analyse which policies contribute to success and failure of economic reform has several benefits. The sharpness of the policy changes in agriculture and the fundamental differences among countries provide as clean a test as we can get. The relative simplicity of agricultural relationships—a farm is an easier production entity to analyse than an industrial firm—also adds clarity to the analysis. Hence, far from being a limitation of the study, our analysis of the reforms of price policy, property rights, and market liberalization in agriculture will yield important general lessons for those interested in the more fundamental relationships between reform, institutional change, and growth.

A book centring on agriculture also is inherently interesting, especially to those studying economic development. For example, in most East and Central Asian nations agriculture dominated the economy during transition and the changes in the sector have had an important impact on overall economic performance (Perkins 1994; Chan, Kerkvliet, and Unger 1999; Green and Vokes 1998). When more than 50 per cent of a nation's labour force is employed in agriculture, and when the major share of consumer income is spent on food, successful agricultural reform can have a major impact on poverty reduction and the welfare of the population. In fact, in studying the link between policy and performance, we believe that there are lessons for those studying economic performance outside the transition world.

Although we will provide a lot of data, include a lot of analysis, and review many studies, our work in this book is still best classified as a mega-analysis. Despite some variation from study to study, we believe that one of the most remarkable conclusions of our work in this book is that there is a fairly clear and consistent set of findings.

To meet this goal, in the first part of our book we pursue several specific objectives in analysing the economics of agricultural transition. In Chapter 2, we systematically document the post-reform trends in the agricultural performance in all transition countries of Asia and Europe. A list of the twenty-eight transition countries that we examine (some in more depth than others) by their geographical categorizations is in Table 1.1. In Chapter 3, we present a conceptual model to help clarify some of the essential characteristics of agricultural transition. In Chapter 4, we discuss in detail several key reforms, such as price and subsidy changes, property rights reform, and market liberalization. In Chapter 5, we review the evidence linking these reforms to the observed rises and falls in output and productivity and present quantitative assessments of the reforms' effects. In Chapters 10 and 11 of the book, we review our general findings and draw a series of lessons.

While the transition literature is rich and we document, analyse, and discuss many issues, we believe studying agriculture reform and performance leads to several new sets of insights. First, unlike the view of sceptics who find little in common among reform experiences across the transition world, the literature and data from East Asia, Central Europe, and the CIS nations provide a consistent picture linking reforms in agriculture to the performance of the sector. In particular, the miraculous growth of output in East Asia and the crash in output in CEE and the CIS nations can almost fully be explained by the shifts in the relative terms of trade. Second, while the performances during the initial reform years differ dramatically in terms of output contours between East Asia and CEE, when measured in productivity, however, the paths are remarkably similar. Property rights

Table 1.1 List and classification of transition countries

Regions

Transition countries

Central and Eastern Europe (CEE)

Commonwealth of Independent States (CIS)

Former Soviet Union (FSU)

East Asia

Central Asia

China

Vietnam

Laos

Myanmar

Mongolia

Kazakhstan

Kyrgyzstan

Tajikistan

Turkmenistan

Uzbekistan

Transcaucasus

European CIS

Armenia

Azerbaijan

Georgia

Belarus Moldova Russiaa Ukraine

Baltics

Estonia

Latvia

Lithuania

Central Europe

Czech Republic Hungary Poland Slovakia

Balkans

Albania Bulgaria Romania Slovenia

Geographically, only part of Russia, Including Moscow, Is In Europe.

x x x reform—decollectivization in East Asia and land restitution and farm restructuring in some CEE nations—gave strong income and control rights to producers which in turn resulted in strong productivity growth. The emergence of institutions of exchange also played an important role in explaining East Asian and CEE productivity growth. Finally, our analysis demonstrates that the real outliers in the reform process are the CIS nations. The absence of markets and poor property rights exacerbated the deteriorating performance caused by falling output-to-input price ratios and mired many CIS countries in a decade of productivity stagnation.

Based on these insights, several general lessons emerge. When measuring success, it is important to carefully compare the performance of transition nations on the basis of productivity, not output. Definition of success changes fundamentally when comparisons are based on productivity. In addition, while we find that initial conditions and the sequencing of policies do make a difference in making reform policies successful, our analysis suggests that above all success requires two key elements: good rights and an institutional environment within which agents can exchange goods and services and access inputs. However, despite the need for rights and markets or market substitutes, we also find that there clearly is much room for experimentation and heterogeneity. In the final analysis, on the basis of our study of the first decade of agricultural transition we find that growth and rising efficiency occurred in almost all nations in which reformers created property rights and improved the marketing environment.

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