The Performance of Bulgarian Food Markets during Reform

Food policy often depends on markets and
markets depend on institutions. But how good do institutions
have to be before reforms can be launched? Relying on well
timed surveys of agricultural prices and a joint study by
the Government of Bulgaria and the World Bank on
agricultural market institutions, this paper presents
evidence that performance in food markets improved following
significant policy reforms in Bulgaria, although public
institutions remained weak. This suggests that even though
strong institutions are preferred to weak ones, it can be
costly and impractical to delay policy reforms until work on
strengthening institutions is finished. Still, measured
performance varied by place and by commodity, suggesting
that markets developed at different tempos and that the
distribution of benefits from improved markets was uneven.
This points to the need to address the costs of adjustment
as policies change. The paper introduces a new approach to
measure market performance based on composite-error techniques.