Super-large Farms: The Importance of Institutions

There are many reasons for the evolution of super-farms in some of the CIS. This paper does not intend to elaborate on the whole set of reasons. There are already many studies which provide surveys on the background and the rationale of these organisations. This paper aims at focusing on one specific determinant of the rise of super-large farms, namely institutions. The focus is chosen as this determinant seems to have been overlooked, partly because it is completely beyond the neoclassical approach. Institutions as rules of the game can be classified into four levels according to Williamson. The paper mainly deals with embedded institutions. It is shown that these institutions are country-specific and vary widely across countries. It is argued that the evolution of super-large farms could only arise because cooperative and corporate farms survived up to bankruptcy and because embedded institutions impeded the foundation of family farms. Mental models of policy makers did contribute to the amalgation of corporate and cooperatives into super-large farms. However, it is noted that embedded institutions had such strong effects because markets did not work adequately and legislation and its enforcement was not supportive for the foundation of family farms. The paper ends with an evaluation from the economic point of view of the existence of super-large farms and with a projection of what may happen in the future.