Economic Assessment of Agricultural Market Distortions in Bulgaria during the Transition: PAM Analysis

N. IVANOVA

Institute of Agricultural Economics, BG–1605 Sofia, Bulgaria

Abstract

IVANOVA, N., 1999. Economic assessment of agricultural market distortions in Bulgaria during the transition: PAM analysis. Bulg. J. Agric. Sci., 5: 683-690

The study presents a policy analysis matrix (PAM) analysis for the period of transition in Bulgaria providing a simple analytical framework for policy evaluation. It includes a quantitative measurement of the effects of policy on producers income as well as comparative advantages of the sector and identifies the level of market distortions. PAM indicators (Nominal protection Coefficient (NPC), Effective Rate of Protection (ERP) and Domestic Resource Costs (DRC)) are calculated for the period 1989-1997, as due to lack of data on costs of production DRC and ERP indicators are calculated for the base year (1989) and the last year included in the analysis (1997). All indicators are calculated for seven major agricultural products, wheat barley, maize, sunflower, milk, pork and chicken.
The results of the analysis show that during the whole period the market has been quite distorted or perhaps more correct underdeveloped, except for sunflower. Agricultural policy applied caused much more distortions to grains market then to livestock products markets. The analysis also shows that the comparative advantages gained during the transition is mainly due to a decrease in the share of labour and capital costs. Therefore with the improvements in the overall economic situation (i.e. increase in labour and investment) in the country i.e. in long term it could hardly be expected that Bulgaria will still have such comparative advantages for any farm products.

Key words: PAM analysis, comparative advantages, Nominal Protection Coefficient, Effective Protection Coefficient, Domestic Resource Costs