the 2006-11 period. This suggests that either capital constraints or other factors prevented growth of medium sized farms.

# **3.1 Data sources and overall changes in regional productivity characteristics**

The basis for our empirical work is data collected annually for the years 2001 to 2011 by Ukraine’s State Statistics Committee (through form 50SG) for the universe of the about 10,000 large commercial farms in the country. The unit of observation is the legal entity rather than the physical production unit. For sizes below 5,000 ha, both are usually identical. Beyond this size, a single legal entity may operate multiple farms and if interest is in production, we need to adjust for this.<sup>9</sup> Also, agri-holdings -often established to access capital from outside Ukraine through a public offering- may comprise multiple legal entities. Without more detailed information on whether an enterprise is part of a larger agriholding, it will be difficult to account for how this may affect capital access. Questionnaires are administered by mail with non-respondents having to pay a fine. Experts also note that incentives for over- or under-reporting balance each other as responses are used as basis for taxes as well as subsidies.

Questionnaire and reporting requirements changed slightly over time.<sup>10</sup> We can, however, construct a consistent series for area cultivated and output value, in 2010 US dollars, from crop production for 11 crops and cost of key inputs including labor, fertilizer, seed, fuel and energy, agricultural services, and capital depreciation.<sup>11</sup> As farms above 200 ha were not affected by the changes in reporting requirements, we restrict the sample to these farms -who together cultivate close to 20 million hectaresto avoid bias.<sup>12</sup> We limit attention to crop production as data on livestock production are noisy.<sup>13</sup> Discarding farms that appear in the survey only once provides us with 92,324 observations from a total of 16,724 panel farms. The sample restricted to the farms registered outside the cities includes 89,736 for a panel of 16,191 farms.

Changes in the yields of specific crops, prices, and structure of output as summarized in table 1 point to major increases in yields of sunflower, soybean, corn, and sugar beet (from 0.9 to 1.9, 1.1 to 1.9, 3.3 to 5.9 and 19.7 to 32 t/ha, respectively) at the national level, compared to stagnation or decrease for wheat and barley (3 to 3.1 and 1.8 to 1.7 t/ha), with differences depending on regions’ comparative advantage.

> 9 As we know the locality where firms are registered, one way of adjusting for this is to exclude from the analysis entities registered in towns. However, as discussed below, inclusion or exclusion of these farms does not affect our results in any substantive way.

> 10 In terms of coverage, reporting requirements were relaxed in 2004 and in 2007. The choice of 200 ha as cut-off consistently excludes farms that dropped out later due to changes in reporting requirements. Substantive changes in the questionnaire include (i) disaggregation of area by crop from 2004; (ii) disaggregation of inputs by crop and inclusion of data on taxes and subsidies in 2007; (iii) addition of factor prices in 2010. 11 The survey includes information only on wage payments, implying that inputs by family workers who do not receive a wage are not recorded. Although this is unlikely to be a big issue at the farm sizes considered here, it will need to be taken into account in interpreting our results. 12 The survey focuses on legal entities rather than physical production units and has to be filled by farms that either have (i) a land area of 200 ha or more; (ii) at least 50 units of cattle, pigs, or goats; (iii) at least 500 units of poultry; (iv) at last 20 permanent employees; or (v) at least UAH 150,000 UAH (19,000 USD) revenue from sales of agricultural commodities or services.

> 13 Part of the reason is that higher levels of vertical integration in and subsidies to the livestock industry imply greater use of transfer pricing and under- or over-reporting of output and profits for tax purposes. The focus on crops only does not affect our main estimates, largely because of the inclusion of farm fixed effects (results are available on request).

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