Why Has Poland Avoided the Price Liberalization Trap? The Case of the Hog-Pork Sector.

Price liberalization in the agrifood economy in the transition economies is likely to slip into a trap: food prices rocket up, consumption declines, but food supply does not catch up and even contracts. However, during the transition period following the 1989 price liberalization, the Polish hog-pork sector succeeded in avoiding this trap. By conducting market structure and econometric analysis, this article looks for the reasons for this success. In the Polish hog-pork sector the restructuring of state-owned enterprises and the emergence of private firms introduced an effective price transmission mechanism between the processing-retailing and farm levels. This mechanism allowed farm supply to respond to changed demand and to take advantage of increased retail prices. Such a relatively efficient marketing system was made possible by a relatively stable macroeconomic environment and limited government intervention. Copyright 1998 by Oxford University Press.