Public Policy and Administration Review

Land Concentration and the Optimal Size of Agricultural Enterprises in the Polissia Zone of Ukraine
Moskalenko Anatolii

Abstract
Determining the optimal size of farms has been one of the most enduring practical issues and theoretical concerns in agricultural economics over the past one hundred and fifty years. (Bielik & Rajcaniva, 2004; The problem lies in this. While increasing size and resulting economies of scale will initially lead to higher marginal returns and lower marginal costs, owing to more effective use of the factors of production, the point is eventually reached where the opposite effect—lower marginal returns and higher marginal costs—takes hold. Finding the optimal size of enterprises thus remains a pressing practical and theoretical concern. Recent processes of land consolidation in Polissia, one of Ukraine’s natural climatic zones and a major centre of agricultural production, provide an opportunity to develop new insights into this long standing practical and theoretical concern. Utilizing data from the Ukrainian State Department of Statistics on different groups of agricultural enterprises, this paper explored the dynamics of land use change in Polissia from 2007 to 2012. It is evident that a strong tendency towards concentration of land took place. The optimal size for agricultural enterprises was then determined, taking into account specialization of production by enterprises. For purposes of analysis, all the enterprises in the study area were divided into three groups, based on the relative density of the plant growing branches in the commodity output structure. A complex indicator of the efficiency of use of farmlands, combining both monetary and natural indicators of efficiency of use of farmlands, is put forward. Nonlinear functions are used to determine the optical size for each type of agricultural enterprise in the Polissia zone, depending on its specialization. The analysis shows that the optimal size for agricultural enterprises devoted solely to crop production is 3732 hectares, the optimal size for those having some livestock production (up to 40 per cent) is 5336 hectares, and the optimal size for those devoted more than 40 per cent to livestock production is 5392 hectares.

Full Text: PDF     DOI: 10.15640/ppar.v3n1a6