support or subsidy policies that have been argued to artificially depress farm sizes (Adamopoulos and Restuccia 2011). Partly as a result, it is home to some of the largest farms on earth and has seen considerable land concentration; the country’s 40 largest agri-holdings are estimated to control 4.5 million ha or 13.6% of cultivated area (Lissitsa 2010), a fact interpreted by supporters of large scale agribusiness as evidence of such farms’ superior economic performance. Variations rooted in different patterns of settlement under the czars, the intensity of purges, famine, and collectivization under communism, discovery of minerals, etc., have led to vast differences in social structure and the nature of economic activity across Ukraine’s regions. Reforms of the farm sector from 2001 allow exploring the extent to which initial differences in agrarian structure matter.

Despite their relevance for the debate on farm structures and the future of smallholder farming, the performance of Ukrainian farms has received little attention in the literature. To shed light on it, we use a large farm level panel data set for Ukraine’s commercial farm sector during the period 2001-2011. Descriptive evidence highlights significant changes in farm structure over the period: while median farm size decreased, area under farms cultivating more than 5,000 ha increased by more than 2 mn. ha or 10 percentage points . With yields for oilseed doubling, productivity and overall sector performance also improved markedly.

These data allow us to explore two types of questions, namely (i) links between productivity and farm size and (ii) impacts of initial farm structure on subsequent entry, exit and productive performance. A production function approach allows testing for the existence of economies of scale. While naïve cross sectional estimates suggest presence of significant economies of scale, such a conclusion is not robust to inclusion of farm fixed effects suggesting that superior performance of certain farms is due to locationand farm-specific attributes rather than increasing returns to scale in agricultural production. Farm- and rayon-level fixed effects can be interpreted as measures of managerial ability, or infrastructure access and land quality, respectively. Estimated magnitudes of the rayon fixed effects exceed those of farmfixed effects, suggesting that opportunities for productivity-enhancing investment may be scant where low soil fertility and limited access to public goods and infrastructure constrain options for expansion.

Our analysis demonstrates that observed productivity growth over the period is predominantly due to the exit of less productive operators and the entry of new and more productive operators. Wide variation of initial inequality of operational farm sizes, measured as the share of area cultivated by farms greater than 3,000 or 5,000 ha, across the 472 rural rayons (districts) in our sample allows us to explore to what extent structural factors might affect productivity indirectly through an impact on the rate of entry and exit once other factors are controlled for. We find evidence of a strong negative impact of initial land concentration on subsequent exit and, to a lesser extent entry, suggesting that land concentration slows 3