One of the main goals of agricultural policy reform in general and the reorganisation of collective agricultural enterprises in particular is to enhance the efficiency and competitiveness of domestic agricultural production. One way to achieve this is to create conditions under which agricultural enterprises can evolve in accordance with market requirements. Critical steps towards the creation of such conditions were taken in Ukraine for example at the end of 1999 (Presidential Decree “On accelerating reforms in Agricultural Sector of Ukraine”, December 1999) and recently with the adoption of a new Land Code. As a result, the structure of agricultural enterprises in Ukraine has changed more in the last two years than in the previous eight years of transition, and the heterogeneity of existing forms of agricultural enterprise has increased dramatically.
What lessons can be drawn from this experience? Using data on the results of the economic activity of agricultural enterprises in Ukraine, and detailed data on agricultural enterprises in Cherkasy Oblast, we focus on two important lessons in particular. The first concerns the issue of organizational form. Many policy makers and analysts in Ukraine continue to talk in terms of ‘optimal’ enterprise sizes and structures in agriculture. The data illustrates that this can be misleading and distracts from more important issues. The second lesson concerns the (mis) use of information on average performances when designing agricultural policies. Policy decisions based on average economic indicators will often ‘miss the mark’ considerably, providing unnecessary assistance to above average enterprises in agriculture, and too little assistance to below-average enterprises. In the following two sections we deal with these two lessons in turn, before drawing conclusions in section 4.
