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

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. 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. Our data confirm the rapid outflow of agricultural labour from dairy farming activities: 55% 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 programs, have a positive impact on small farms’ growth.status: publishe