Financial Constraints and Output Targets in Russian Agricultural Production

Agricultural production in Russia has experienced a significant decline in recent years. Agriculture's falling terms of trade and inadequate legal mechanisms on land ownership appear to impose expenditure constraints on Russian farms. This study explores the sources of inefficiency in Russian agriculture by testing for the prevalence of expenditure constraints and output-targeting in addition to actual inefficiencies in 73 farm regions (oblasts). Over 90 percent of the farms experienced profit losses of up to 35.8 percent from all three sources of inefficiency, while only six oblasts are overall efficient. The study found that 74 percent of the oblasts are subject to expenditure constraints, while output-targeting is prevalent in less than 20 percent of the oblasts. In sum, one-seventh of the overall inefficiency, and thus profit losses, is attributed to both financial constraints and output-targeting