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Institutional Factors’ Influence on Socio-Economic Development of

Agrarian Sector

Alexander BednyCentre for Institutional Development of Agriculture,

University of Nizhni Novgorod, Russia

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Empirical Evidence

• European Commission Tempus project IB_JEP-21100-2000 «Democratic Mechanism for Agricultural Development» (implemented in 2001-2004)

• International research project funded by the Academy of Finland “Specialisation and Diversification of Enterprising during Transition – a Comparative Study of Development in Estonian and Russian countryside (LOCAL PATHS)” (started in 2004)

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Empirical Evidence

• Survey among 317 heads of agricultural enterprises of 18 rayons of Nizhni Novgorod Region

Арзамасский Павловский Б/Болдинский

Богородский Перевозский Борский

Д/Константи-й Пильнинский Вадский

Ковернинский Починковский Вачский

Кстовский Сергачский Городецкий

Лысковский Уренский К/Баковский

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Empirical Evidence

• 35 in-depth interviews with the representatives of different social groups in rural areas

• Analytical reports on Russian agri-food sector development

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Sociological portrait

of a head of agricultural enterprise

0

10

20

30

40

50

60

30 именее

31 - 40 41 – 50 51 – 60 61 иболее

Age, years

Среднее общее

4%

Среднее профессио

нальное23%

Высшее73%

Education

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Sociological portrait of a head of agricultural enterprise

State must be responsible for

citizens’ maintenance

Personal responsibility

0

20

40

60

80

1 2 3

Better have small, but

guaranteed income Better have high incomes without guarantees

0

20

40

60

80

1 2 3

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Barriers for Russian agriculture development: managers’ opinions

- Insufficient subsidies (69%)- Inability of agri-stakeholders to stand upon their

interests (40%)

- Prices misbalance (96% respondents)

- No clear “rules of the game” (70%)

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Self-Organisation of Agri-Producers:Potential of Resisting the Negative External Conditions

0

20

40

60

80

1 2 3

One should be very careful dealing with

people

Most of the people are trustworthy

Causes for agricultural associations underdevelopment

% of the total number of respondents

Insufficient State support 58

No strong leaders 52

No traditions of self-organisation 34

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National and International Training Programmes

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The inconsequent governmental policy and absence of clear “rules of the game” (70% respondents)

Seniour agronomist, JSC “Niva” (Lyskovo Rayon) : “… We have been trying to exchange the land plots with the neighboring kolkhoz for 12 year… We are

actually using the land, but it is impossible to legalise it”

Problems of Agriculture: Managers’ Opinions

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System of Socio-Economic Relations in Collective Enterprises: Institutional Trap

• Equalising property distribution at the most of the agri-enterprises

• Symbolical employees’ wages

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97% of managers support their employees’ personal plots

Enterprise ЛПХ

ЛПХ

ЛПХ

ЛПХЛП

Х

ЛПХ

ЛПХ

ЛПХ

ЛПХ

Economical Symbios

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System of Socio-Economic Relations in Collective Enterprises: Institutional Trap

• High transaction costs because of opportunistic behaviour

• No motivation for higher efficiency of the enterprise

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How to get out of the institutional trap?

• Resources are exhausted, bankruptcy

• Change in ownership relations at agri-enterprises

Owner

Vertically-Integrated Structures (example: acquiring by oil and gas companies)

Property concentration in hands of the head (and specialists) of the enterprise(example: successful agri-enterprises in Nizhni Novgorod Region)

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How to get out of the institutional trap?

Heads of Rayon administrations:

«we rely on private owners»

• Comparative analysis of economic performance of respondents’ enterprises

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How to get out of the institutional trap?

Best practices of agri-enterprises’ capitalisation in Nizhni Novgorod Region• JSC «Niva» (Lyskovo rayon)• JSC «Gorbatovskoe» (Pavlovo rayon)• Bogorodsk RAIPO

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• Constraints for ownership relations’ change :

- Equalising and symbolical perception of social justice

- Barriers of financial, social and legal nature

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• Training seminars: experience exchange is the most convincing argument for the rest agri-managers

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Institutional Factors of Socio-Economic Development of Agriculture

Inefficient Legislation

Equalizing property

allocation

Dissociation of agricultural

stakeholders

Survey of 317 managers

35 In-Depth interviews

Analytical materials

Agricultural Sector

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Thank you for your attention!