UP- AND DOWNSTREAM RESTRUCTURING, FOREIGN DIRECT INVESTMENT, AND HOLD- UP PROBLEMS IN AGRICULTURAL TRANSITION

Hamish R. Gow and Johan Swinnen

No 31867, PRG Working Papers from Katholieke Universiteit Leuven, LICOS - Centre for Institutions and Economic Performance

Abstract: Reform in the transitional economies can be characterized by large falls in agricultural output and by strong decapitalization of the agricultural production system. A key factor has been the disruption caused by the breakup of the pre- reform, vertically integrated, centrally planned, contracting system within the agri- food supply chain. This paper analyses how restructuring in the up- and downstream levels of the agrifood chain is affecting the production level, particularly the impacts of hold-up problems usually seen as excessively long delays in the payment for delivered product. Standard institutional solutions used to overcome hold- up problems, including supply contracting, cooperatives and vertical integration, have problems as short- to- medium term solutions. Empirical evidence indicates that FDI in the processing level can solve these hold- up problems, as well as produce important positive spillover effects within the sector and across adjacent sectors. Empirical observations indicate strong output, yield, and investment responses when hold- up problems are solved. This suggests that solving these problems should be a priority for stimulating growth, efficiency and profitability in Central and Eastern European agriculture.

Keywords: Agricultural and Food Policy; Industrial Organization (search for similar items in EconPapers)
Pages: 26
Date: 1998
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Citations: View citations in EconPapers (87)

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Related works:
Journal Article: Up- and Downstream Restructuring, Foreign Direct Investment, and Hold-Up Problems in Agricultural Transition (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:kuliwp:31867

DOI: 10.22004/ag.econ.31867

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