How Distorted Have Agricultural Incentives Become in Europe's Transition Economies?

Abstract

Over the past two decades, earnings from farming in the former communist countries of Eastern Europe and Central Asia have been altered hugely by government sectoral and trade policy reforms. This paper summarizes evidence on the changing extent of distortions to markets for farm products since the transition away from planned prices began. In particular, it examines the extent to which, following initial shocks, there has been a gradual improvement in farmer incentives. This new evidence is not inconsistent with the past pattern of earlier-developing countries, but the speed of assistance increase is relatively rapid and is linked with actual or desired accession to the European Union. The final section focuses on future prospects, particularly what might be done to prevent agricultural protection levels from becoming excessive.