The distribution of dairy farm size in Poland: a Markov approach based on information theory

Abstract

This paper sets out to analyse the evolution of the dairy farm structure of Poland during the post-socialist period. After focusing on how the farm structure has changed over time, an instrumental variable generalized cross entropy estimator is used to develop and estimate a Markov model in order to explore how farm structure will probably develop in the coming decade. The estimator exploits both sample data and prior information, including general and plausible information on farm mobility and structural adjustments based on independent literature. Next, several statistical indicators are computed for farm mobility and for which farms are likely to survive. Finally, milk projections are made and related to policy scenarios. The projections show that the number of dairy farms will continue to decline, but the number of medium and large farms will increase. In the coming decade, subsistence dairy farms are expected to leave the sector slowly. Milk projections show that under the status quo, milk quotas will be binding and overrun, whereas under the 'soft landing' scenario they appear to be only binding after 2010.