Small farmers, standards, value chains, and structural change: panel evidence from Bulgaria

Abstract

Purpose

In the past decade, there has been a dramatic decline in agricultural employment in Bulgaria and several reports have pointed at supply chain modernisation and poor milk quality as the main reasons for the dramatic decline in the number of farms. However, to date the policy debate is been based on ad hoc claims, while there is relatively little micro-level evidence. The purpose of this paper is to analyse the determinants of structural change in the Bulgarian dairy sector in the period 2003-2009.

Design/methodology/approach

This paper analyses the determinants of structural change in the Bulgarian dairy sector in the period 2003-2009, using a unique panel survey of 296 farm households in the North and South Central Region of Bulgaria. In order to control for sample attrition bias, the authors use a two-step Heckman model of farm survival and growth model.

Findings

The data confirms the rapid outflow of agricultural labour from dairy farming activities: 55 per cent of the farm households supplying milk to a dairy company in 2003 stopped supplying in 2009. The main reasons for quitting are ageing of the household, health problems and an increase in off-farm employment alternatives and not supply chain modernisation and milk quality standards. The institutional innovations which are associated with integration in modern supply chains, such as the provision of farm assistance programmes, have a positive impact on small farms’ growth.

Originality/value

The study is one of the first to use panel data to analyse the impact of standards on the survival and growth of small farms in value chains. The authors analyse the determinants of farm survival and growth in the Bulgarian dairy sector in the period 2003-2009, using panel surveys of 296 dairy farm households in the North and South Central Region of Bulgaria and panel data from interviews with dairy companies. The findings are relevant beyond the Bulgarian dairy sector as supply chain modernisation and changes in quality regulations are taken place in many other transition and developing countries.

Citation

Van Herck, K. and Swinnen, J. (2015), "Small farmers, standards, value chains, and structural change: panel evidence from Bulgaria", British Food Journal, Vol. 117 No. 10, pp. 2435-2464. https://doi.org/10.1108/BFJ-11-2014-0389