Economic Transition and the Distribution of Policy Rents: The Case of the Wheat-Flour-Bread Chain in Bulgaria

Johan Swinnen

European Review of Agricultural Economics, 1998, vol. 25, issue 2, 243-58

Abstract: Ivanova et al. (1994) calculate disaggregated PSE/CSE transfers between different stages of the agro-food chain in Bulgaria since 1990. Some of their results appear counter-intuitive given the stylised facts. This note attempts to explain these results, using a more detailed study of the wheat-flour-bread chain. The first conclusion is that transitional excess profits and product quality improvements may explain part of the calculated transfers in favour of retailers but that this explanation is insufficient. A second conclusion is that the large net transfers to "retailers" are mostly rents collected by flour wholesale trading enterprises. A third conclusion is that transition business practices, including monopolistic and collusive behaviour in the agro-food chain, create rents which are not included in the calculated transfers. Fourth, including indirect transfers caused by exchange rates substantially affects the results. Finally, our analysis supports the previous conclusions on the inefficiency of Bulgarian policies. Copyright 1998 by Oxford University Press.

Date: 1998
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