Productivity and Efficiency of Corporate and Individual Farms in Ukraine

The paper presents a comparative analysis of the productivity of corporate and individual farms in Ukraine based primarily on cross-section data from a farm survey conducted by FAO in 2005. We calculate partial land and labor productivity, total factor productivity, and technical efficiency scores (using Stochastic Frontier Analysis) for farms of different organizational forms. Our results demonstrate with considerable confidence that, contrary to established convictions among the Ukrainian decision makers, the large corporate farms are not more productive than the smaller family farms. This finding is not restricted to Ukraine, as a similar result has been obtained by in Moldova, Russia, and the U.S. Policies encouraging a shift from large corporate farms to smaller individual farms, rather than the reverse, can be expected to produce beneficial results for Ukrainian agriculture and the economy in general. The government of Ukraine should abandon its inherited preference for large-scale corporate farms and concentrate on policies to improve the operating conditions for small individual farms. At the very least, the government should ensure a level playing field for farms of all sizes and organizational forms, and desist from biasing its policies in favor of large farms.