The Determinants of Farm Growth, Decline and Exit in Estonia

Abstract

The process of structural changes in Estonian agriculture is influenced by both socioeconomic factors that are similar in other western countries and transition-related factors. This current paper aims to investigate the effects of such socioeconomic factors on the probabilities of farm growth, decline and exit relative to retaining the previous farm size. The survey and agricultural registers’ data are used for multinomial logit estimation. The results indicate that the farm growth probability is highest in the 40-49 year age group. The availability of successors significantly reduced farm exit probability, and the level of education of the farm operator increased the farm growth probability. While off-farm work was more probable in smaller farms and in cases of more educated and younger farm managers, it was evident that the off-farm employment of the farm operator significantly increased the probability of farm exit. While the larger farms have a higher probability of remaining in business, and lower probability to exit or decline, they do not have higher growth probability. Participation in a semi-subsistence farming scheme reduces the exit probability. It has been shown that farms founded during the beginning of transition due to restitution have lower decline and growth probabilities, indicating that such farmers are emotionally more inclined to maintain the farms of their forefathers.