Evaluating the effects of price and trade liberalisation on the technical efficiency of agricultural production in a transition economy: The case of Russia

Abstract

A stochastic production function is estimated, using data on agricultural output and inputs for 75 Russian regions for 1990-95. Regional technical efficiency scores are calculated as the ratio of actual to potential output. The average efficiency score improved from 0.77 to 0.92 in 1991-93 and then declined to 0.78 by 1995. Losses from technical inefficiency in terms of under-production were cut by more than 20 per cent during 1991-95. Short-run overall improvements in technical efficiency were achieved primarily through contraction of input use relative to output. The role of technological change in improving efficiency was negligible. Additional capital investments in new technologies and management training will probably be needed to achieve further efficiency gains. Investments could be quite profitable, since real returns to capital increased substantially during the reforms. Progress in reducing technical inefficiency was uneven across the regions. Regions that still employ price controls and subsidise production are experiencing increases in technical inefficiency. Copyright 1998 by Oxford University Press.

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