Agrarian Reforms in Eastern European Countries: Lessons from International Experience

The fall of the Berlin wall has led to a monumental change in the social and economic structure of most countries in Central and Eastern Europe (CEE) and the CIS that have profoundly affected the nature of the rural sector and the livelihood opportunities open to rural residents. Prior to 1990, most of these countries had de facto abolished private property rights in favor of state or cooperative ownership. Agricultural production was in most cases collective, leading to inefficiencies due to free-riding, moral hazard, and lack of individual incentives for effort supply as well as investment. In large collective or stateowned farms (about 2000 ha; 500 workers) lack of transparency added to the difficulties of monitoring implied by sheer size. The goal was to meet centrally prescribed targets established with little consideration to profit or hard budget constraints, and their survival relied on write-offs and subsidies, and political connections. Cuts in producer and consumer subsidies, price liberalization, reduced demand with falling incomes, and lower demand for exports within the former Soviet Union led to a significant fall in the terms of trade for the agricultural sector throughout the region. As a result, input use and output from the agricultural sector declined precipitously, stronger than for non-agriculture (Csaki, 2000). The extent to which agricultural production was able to recover since the 1990s was affected by the level of economic development, the type of macroand privatization policies pursued, as well as the extent to which these policies could actually be implemented on the ground. Land reform and farm restructuring have played an important role in this process. This is due to the importance of land as an asset for the rural population and the relevance of well-functioning land markets as basis for financial market development. Macro statistics highlight the tremendous heterogeneity of the countries in Eastern Europe with respect to the level of economic development, land endowments, and the importance of the agricultural sector. Table 1 illustrates that per capita GNP ranged from of almost US $10 000 in Slovenia to of US $370 and US $380, in Moldova and Tajikistan, respectively. In between are countries such as Armenia and Azerbaijan ($460 and $480),