Production Risk and Technical Inefficiency in Russian Agriculture

This paper aims to contribute to a better understanding of possible causes of considerable production variability that characterised Russian agriculture during the last decade. The study investigates production risk and technical inefficiency as two sources that influence production variability. Using panel data from 1996 to 2001, an empirical analysis of 443 large agricultural enterprises from three regions in central, southern and Volga Russia is conducted. A production function specification accounting for the effect of inputs on both risk and technical inefficiency is found to describe production technologies of Russian farms more appropriately than the traditional stochastic frontier formulation.