An Analysis of Grain Production Decline During the Early Transition in Ukraine: A Bayesian Inference

The first years of reforms in the former Soviet Union resulted in a sharp decline in agri- cultural production. Between 1989 and 1992, Ukrainian gross agricultural product dropped some 20%, and the output of grain, which is produced mostly in the collective sector, went down some 25% (World Bank). Several rea- sons for the fall have been advanced. In ad- dition to weather variation across years, there was a drop in state deliveries of production in- puts, especially fertilizer and pesticides (World Bank). The emergence of private opportuni- ties resulted in labor and management mi- gration from the large-scale collective system (Csaki and Lerman), thus reducing the av- erage labor quality in the sector. The ability of farms to produce efficiently was also af- fected by the transition-related break in old production ties and networks (Blanchard and Kremer). While all three explanations of pro- duction differences between years (weather variability, input quantities decline, and loss of production efficiency) are plausible, little is known about the relative contribution of these factors to the overall decline in production. Identifying the reasons for the decline in agri- cultural output in countries like Ukraine is not only important from a historical perspective, but furthermore, may be important to antici- pate the chances of success of new policies and initiatives, such as accession to the European Union (Macours and Swinnen). We attempt to fill in the gap and improve the understanding of the decline in grain production in early tran-