Subsidies and Employment: Exploring the Experience of Corporate and Family Farms in Russia

ABSTRACT

The paper investigates whether agricultural enterprises and the family farm sector in Russia respond differently to agricultural subsidies with respect to agricultural employment. Results show that investment subsidies work in a conventional capital-labor substitution framework, reducing employment in the sector to which they are applied but indirectly increasing employment in the alternative agricultural sector. Production subsidies increase employment in the family sector characterized by low labor elasticity, but reduce it in the more labor elastic enterprises sector. The remaining covariates have opposing signs in the two models, indicating a qualitative difference between agricultural enterprises and the family sector.

KEYWORDS:

• Agricultural enterprises
• employment
• family sector
• Russia
• subsidies

JEL CLASSIFICATION:

• C23
• C26
• E24
• Q18

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

The data is provided by the Russian Ministry of Agriculture and, according to the terms of use, is not open access data.

Notes

1. In particular, the programme specifies the target indicator of rural employment rate of people 15 years of age or older as 55% to be achieved by 2030. For reference, the rate in 2021 was 52.2% (https://mcx.gov.ru/activity/state-support/programmes/).

2. Programme section “Rural employment promotion” includes compensation to agricultural producers and processors for the costs of training of their employees and the costs associated with the payment of labor and accommodation of student interns.

3. This was the implementation of investment subsidies in the period analyzed in this paper. After 2017, support was disbursed under the form of reduced interest rates fixed by the government, combined with a financial compensation to lending banks (OECD 2020).

4. In Figure 2 data are based on total employment in agriculture as the main (only) job. This number is close to the full-time equivalent (FTE). Thus, according to Rosstat data on the number of hours actually worked (compendium “Labor force, employment and unemployment in Russia”) in 2007 the equivalent of full-time employment in agriculture, forestry and fishing in was 5.8 million while the headcount was 6.3 million people; in 2015–4.3 million and 4.9 million respectively. Bogdanovskii (2005) argues that those employed in the informal sector of agriculture, i.e. in household plots oriented toward their own consumption, practically double the number of people employed in the sector. Thus, in 2007 FTE in subsistence oriented household plots was 7.6 million people, in 2015–5.1 million people (calculation based on Rosstat data, compendium “Labor force, employment and unemployment in Russia”). In our research, however, those employed in the informal subsistence oriented agricultural sector are not included in the data set.

5. The main indicators of rural employment are consistently lower than urban ones. Thus, labor force-to-population ratio and employment rate in rural areas were 65.9% and 60.7% in 2015, respectively (aged 15–72 years). For comparison, urban indicators were 70.2% and 66.8%, respectively. At the same time, the problem of rural poverty persists. In 2015, the average per capita disposable resources of rural households were by 35% lower than the resources of urban ones. As a result, living in rural areas is one of the three risk factors for falling into a state of chronic low-paid employment in Russia Gimpelson et al. (2018)).

6. All regions in Russia as of 2014 with the exception of federal cities (Moscow, Saint Petersburg) and autonomous districts that are part of regions.

7. The average annual deviation of the total agricultural subsidies according to the Ministry of Agriculture, which we use in the study, from the PSE minus market price support is 12.5% up. The deviation may be due to differences in the classification of subsidies, and the inclusion of fisheries and part of rural development subsidies in the consolidated subsidies by region in the data of the Ministry of Agriculture.

8. Official statistics provides the regional agricultural output as a monetary value in current prices of the sum of crop and livestock output of all agricultural producers.

9. This is the only difference to the reduced (no interactions specification) in Appendix 1, where this effect is not significant for both agricultural enterprises and the family sector.

Additional information

Notes on contributors

Philip Kostov

Philip Kostov is Reader in Quantitative Economics at University of Central Lancashire. He obtained his Ph.D. in Agricultural Economics from the University of Newcastle upon Tyne, UK, in 2001. His main research interests relate to quantitative methodologies and include issues such as spatial econometrics, model selection issues; quantile treatment effects; counterfactual distributions, nonparametric and semi-parametric models.

Sophia Davidova

Sophia Davidova is Professor of European Agricultural Policy at the School of Economics, University of Kent, UK. She obtained PhD in International Economics at the Economic University in Sofia, Bulgaria. She moved to the UK in 1994 and joined Wye College, University of London. She became Reader at Imperial College, London in 2004 and Professor at the University of Kent in 2010. Her research interests are in the area of microeconomic analysis of the impact of agricultural reforms in Central and Eastern Europe, and the effects of CAP reforms on producer performance and income diversification.

Yulia Nikulina

Yulia Nikulina is Postdoctoral Researcher at the Institute for Agrarian Studies within HSE University, Russia. Before joining HSE University, she obtained her Ph.D. in Economics from the St. Petersburg Federal Research Center of the Russian Academy of Sciences in 2011. Her main research interests relate to agricultural policy evaluation, rural development and especially rural employment, subjective well-being.

Valeria Arefieva

Valeria Arefieva is Associate Professor at the HSE University (Russia), Faculty of Economic Sciences, Department of Statistics and Data Analysis. She is also an expert at the Institute for Agrarian Studies (HSE University Department). Her research interests include statistical data processing, data analysis in agronomy, rural development.