CAUSES OF OUTPUT DECLINE IN ECONOMIC TRANSITION: THE CASE OF CENTRAL AND EASTERN EUROPEAN AGRICULTURE
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This paper quantifies the relative importance of the different causal factors of the changes in agricultural production in Central and Eastern Europe since 1989 using a production function and supply response approach. The analyses show that the deterioration of the agricultural terms of trade explains a considerable part (40 to 45 %) of the production change. The effects of the extreme weather conditions that coincided with the reforms explain 10 % to 20 % of the output decline, where as the transition uncertainty accounts for 10 % to 15 %. The shift of the production to family farms caused a productivity increase due to improved labor effort but the process of disruption of the production structures caused a (temporary) negative effect. The net effect of the restructuring was slightly positive. Privatization had a strong negative effect on the output. In Albania, Bulgaria and Romania this effect was due to declined technical eficiency. In contrast, factor productivity increases in the Czech Republic, Slovakia and Hungary completely offset this effect. The negative privatization effect in these countries was largely due to factor adjustment (mainly labor shedding), i.e. improvements in allocative efficiency. Finally, our analyses suggest that up to 25% of the output decline may be a statistical phenomenon.