Employment and Efficiency of Farms in Transition: an Empirical Analysis for Brandenburg

Changes in the political, economic and legal framework after reunification led to major structural changes in East German agriculture. Altered factor and product price relations, abolition of traditional channels of distribution and problems with liquidity forced existing farms to adjust their organization and factor input, to increase productivity and to seek technical progress. Although the number of agricultural enterprises has grown continually as a result of the appearance of new and re-established farms, the number of people engaged in agriculture has fallen dramatically. In Brandenburg - the federal state surrounding Berlin - 31 per cent of those employed in agriculture in 1990 were forced into early retirement, and another 20 per cent took part in further education, retraining or employment creation schemes (MELF, 1997). Many of those workers who had been engaged in employment creation schemes became unemployed after completion. Even from 1992 to 1997, the· workforce in agriculture decreased from 39 055 to 25 991 working units (WU). The paper attempts to study the factors that have determined the employment decisions of farm operators and how they adjusted employment over time with particular regard to legal forms and production structures. This is achieved by applying a data envelopment analysis to a sample of 89 farms, existing over the period 1992/93 to 1995/96. The article is structured as follows. After presenting the theoretical background of labour deployment in enterprises undergoing transition, some hypotheses are developed as a guideline for the empirical investigation. The next section describes the method and the data which are utilized and that is followed by presentation and discussion of the empirical results.