Public policies and private initiatives in transition: evidence from the Polish dairy sector

Abstract

The drivers of institutional change in Central and Eastern Europe have changed considerably since 1989. Taking these changes into account, we identify three – partly overlapping – transition stages: public policy changes dominated the start of transition, private initiatives became crucial in a second stage and, more recently, policy changes related to the EU accession process became the dominant drivers. We use unique primary interview data on the supply chain and farm household data to study the impact of these institutional changes on structural adjustments in the Polish dairy sector. We find distinct patterns in farm restructuring and link these results to specific institutional changes in the different transition stages.

Acknowledgements

This research was funded as part of the Regoverning Markets Project (http://www.regoverningmarkets.org).

Notes

 1. See Berglof and Roland (2007) for an overview of policy changes at the start of transition and their impact.

 2. The first stage of transition is not covered explicitly by our two samples. However, there exists an extensive literature on the initial impact of the collapse of the communist system and the implementation of reforms on the agricultural sector (see for example Macours and Swinnen (2000) and Rozelle and Swinnen (2004) for overviews).

 3. Warmińsko-Mazurskie is one of 16 administrative regions in Poland. Following the European Union classification (Nomenclature of Units for Territorial Statistics (NUTS)), these regions are at the NUTS 2 level.

 4. This is not a panel dataset. The 2001 and 2007 surveys were conducted independently.

 5. For more details see the description of the 2007 dataset in Milczarek-Andrzejewska et al. (2008).

 6. It should be noted that some gminy were overrepresented in the 2001 survey to answer a specific research question related to the presence of foreign-owned dairy processors. However, research showed that the presence of a foreign dairy company did not affect farm size or farm growth in the area (see Dries and Swinnen (2004) for more details). Therefore, we believe that for the purpose of this study the two samples achieve a sufficient level of randomness to justify broad comparisons.

 7. Note that at the beginning of each of the two periods our sample includes only commercial farms. At the end of each period, however, we observe both commercial farms and farms that have quit their relationship to the market and produce milk only for home consumption. This helps to explain the discrepancy between the share of the smallest farms in 2000 and 2001. The 2000 figure relates to both commercial and semi-subsistence farms, whereas the share in 2001 is based only on observations from commercial farms.

 8. During the first six years of the market reform the dairy herd declined by about 28%. A significant decrease was also observed for milk yields per cow, which declined by more than 4%. Milk production, forced to adjust even further by falling real demand, dropped by 28% to reach its lowest level of 11.3 million tons in 1995 (GUS 1996).

 9. It should be noted that the share of FDI in the Polish dairy sector has always been relatively small compared with other countries in Central and Eastern Europe. For example, the share of FDI in the dairy sector in Hungary and Slovakia is around 90%, while in Poland it is only 10–15% (Wilkin et al. 2007).

10. There are different channels for milk collection in Poland. The first channel is what we refer to as the modern marketing channel. The milk is collected directly from a cooling tank that is located at the farm. In the traditional marketing channel the milk is collected from a collection point where milk from several different farmers is pooled. In the most common form of the traditional channel, milk is delivered to a village collection point that is owned by the dairy company. In some cases the collection point is privately owned (often by a farmer) and the costs of managing the collection point are pooled among the farmers who use this marketing channel.

11. The Polish milk quota system was revised recently: since 2009, milk quota trade across voivodship borders has been allowed.

12. These shares are in line with estimates of farm exits based on national statistics.

13. As was mentioned earlier, the restriction on milk quota trade across voivodship borders was lifted in 2009.