Effects of economic transition policies on Yugoslavia's agricultural sector: A quantitative approach

The optimal level of state ownership of the agricultural land in Yugoslavia is determined under policy scenarios including food security, price support, trade commitments or quotas, and employment levels. These policies are evaluated with reference to their price (cost) implications, consumers' and producer' welfare, trade revenues, machinery transfer from state to private sector, wages, and overall performance (output) of the agricultural sector. Bilevel programming is used as the methodology because it recognizes different objectives of policy makers (government) at the upper-level, and state and private farms at the lower-level. The results of the research indicate that economic reasons call for a moderate and partial privatization program in the short and intermediate run. Excessive privatization may further disturb the agricultural sector performance and development, especially as the state farms demonstrate their resilience and ability to adjust. Politically sustainable solution, however, must include non efficiency objectives and policies. It is shown that including the social safety-net policies produces faster privatization with fewer adverse social effects than if privatization is an objective per se.