Economy and Agriculture in Russia - Research Proposal Example

Economy and Agriculture in Russia Vertical integration of the grain agricultural market in developing countries and the countries with transition period of the economy (East Europe), especially in the context of agro-holding of Russia Introduction There are different ways to develop agricultural productivity in the countries with transition period of the economy (East Europe, Russia) as well as vertical integration of the agricultural market. The approach taken and use of particular methods and techniques are discussed. The different philosophies applicable here could explain agriculture in transitional economies as in Eastern Europe and especially Russia, and these would be theories such as positivism, realism, instruments and strategies. The procedures, size of samples, methods of selection, choice of variables and controls, tests of measurement, as in induction and deduction are considered here as the research approach. This in turn would be related to the development of agricultural economy and vertical integration of the agricultural market. The discussion here is based on vertical integration of grain agricultural market in transition economies of Eastern Europe (such as Russia) considering both secondary and primary research methods. The deficiencies in research methods are highlighted and the focus is on the agricultural and economic possibilities in Russia and other East European countries. Background In the context of Russia and other transition economies, it would be essential to analyze whether the Central and Eastern European countries have sustainable levels of agricultural output. However the impediments for emergence of agro food sector may have to be found out (OECD, 1998). The key issues related to structural reforms of the agro food sector especially within transition economies would deal with credit and finance, foreign direct investment, and efficiency matters in the sector. Support levels provided to agricultural companies and initiatives should increase and transition economies are in focus as these globally emerging economies are the ones which will become more important for world markets than the more stable economies. Funke and Ruhwedel (2005) used data from 14 East European transition economies to evaluate the relationship between productivity and economic growth in these regions. The results obtained from trade data suggest that the growth model of East European transition economies may be explained with outward orientation and integration of world economic patterns. Russia's development and economic growth will have to be considered against the 1998 financial crisis that was triggered with the international financial crisis. With the financial crises, declining income and rising prices and inflation led to stockpiling of products for short term needs. Crisis also increased price competitiveness of agriculture and food industry although there has been a reported overall declining performance of the Russian economy after the 1998 crisis, especially within the agro food sector (Serova et al, 1999). The poor institutional settings within Russia and extensive bartering could be detrimental for the economy. Russia follows protectionist measures and measures to counteract food shortages although Serova et al (1999) claim that this may actually increase the inconsistency of Russia's food policies. Seeth et al (1998) draws out on the case of poverty and economic problems in Russia to bring out new dimensions in poverty research, especially within the context of Russia. The urban and rural households in Russia tend to respond to crisis situations and economic stress with increasing dependence on home gardening and subsistence agriculture. Agriculture is especially important for income and food consumption among the middle income strata although the poorer sections of society have very scarce resources and small plots and gardens that may not be adequate for income or food consumption. Household labour force and opportunities available would be some of the main factors that can promote agriculture in small scale. Returns on plots on average is expected at .50US$/day and according to Seeth et al (1998), governmental agricultural policies should not neglect household agricultural production which accounts for more than 40% of the country agricultural output and have a stabilizing role in the economy. Methodology The focus on vertical integration of the agriculture market within Eastern European nations and Russia show the working methodology of the transition economies and a vertical integration model usually has the components of raw materials or resources leading to production or manufacturing, assembly, distribution and selling to potential customers. A vertically integrated model is the most suitable for explaining changes within the transition economies especially within Russia and shows how the changing global markets could affect the economic condition of several countries especially countries in transition economic conditions. Vertical integration model suggests how much an organization controls its inputs and outputs or production and distribution of services (De Fontenay, 1999). Backward integration would be a firm's inward controls and forward integration is a firm's outer controls and shows the value chain established between the firms, its suppliers, distributors and management chains. Vertical integration models are used for strategy development and in analyzing industry dynamics and some of the advantages would include economies of scale, scope, competitiveness and costs reduction, control on value chain and better relationship with suppliers and consumers (Chemia, 1996; De Fontenay, 1999). However vertical integration cannot solve all problems and core competencies will have to be delineated. Only quantitative means cannot suffice understanding vertical integration and qualitative and quantitative methods have to be used together. External markets, economies of scope, market conditions are important determinants of the vertical integration model and in case of Russia the latest developments in the agriculture market could be compared with the general market conditions and changing economy to understand how this model could be used within the context of Russia and its agricultural sector. Some of the theories that could be used to identify factors responsible for success of the agriculture sector on the basis of market conditions would be based on positivism and realism issues. Since within the realist perspectives states are motivated by a need for power and societies are governed by facts and reason, market conditions and changes as anticipated would be more important. Positivism on the other hand is also a kind of realism although it would be focused on observable quality and testability of any hypothesis and in this sense positivistic approaches could determine the practical value of any model through strictly scientific methods. Using the vertical integration model the agricultural inputs and outputs within Russia could be studied using agricultural data. Analysis is done by considering not just the theories and especially with a focus on positivistic approaches but also the data and how the data should be interpreted. The two different methods of inductive and deductive reasoning could also be considered as we use models and theories or hypotheses in deductive reasoning and in accordance with these models perform our expected observations and reach our conclusions and confirmations. In case of inductive reasoning, observations are used to find out general patterns and hypothesis or theory or model. In this case, we already begin with a theory, the vertical integration model in which agricultural production, distribution and marketing follows a vertically integrated structure and beginning with this basis we move on to expected patterns and general observations on the production and distribution system in the Russian agriculture market. Thus the process used here is deductive reasoning and a positivistic approach to testability of the theory or model is also the basis of this study. Sample data for this study will be obtained from reports and studies available from the Russian agricultural sector and published papers are also part of secondary data. Thus primary data are obtained from possible government sources or databank or economics and statistics on the agricultural produce and distribution reports and secondary data are obtained from published research studies on similar topics. The data are then tabulated and subject to analysis and interpretation to understand whether the vertical integration model could explain the data obtained and how it fits with the findings. Both quantitative and qualitative methods are used within the study as the qualitative methods would show the extent to which the vertical integration model or any other model are applicable within the Russian economic study and highlights important points and features of the development of the Russian economy especially within the context of the Agricultural sector. The quantitative analysis of the data would provide statistical figures and measures on the changes in agriculture and production and distribution conditions within the agriculture sector in concrete quantitative terms although qualitative and general understanding of the agriculture sector changes would be more beneficial in predicting long term economic and social changes within the entire Eastern European region and nations including Russia. Some of the resources for collection of data could be online sources such as government or public websites from which data on the agricultural sector in Russia could be downloaded. Some of these are Economic Research Service, Russian Agricultural census, and general data on Agricultural Production. All these data are available on the internet and could be used for the quantitative measures of the research study. Qualitative aspects are derived from these quantitative data and provide the basis for the research. This is primary data and secondary data would be obtained by analyzing and interpreting of published research papers, some of which have already been briefly discussed or mentioned in the previous section on background. Although no direct experimental study is done, the focus here is on attaining and analyzing already published primary data obtained from reliable government sources or internet data bank and economic or statistical websites. Conclusion: This discussion brought about the changes within the agriculture market and how the vertical integration model could be used to describe the agro sector of the Russian economy. The flaws and deficiencies in this model could be explained within the context of philosophical theories and how positivistic approaches or real cause effect changes could be used to determine the condition of Russian economy instead of using other predictive models of the economy. This would also be in accordance with the approaches taken to explain the changes in the Russian and Eastern European transition economies and integration with the EU. Bibliography Archibald Sandra;Banu Luana;Bochniarz Zbigniew (2004) Market Liberalisation and Sustainability in Transition: Turning Points and Trends in Central and Eastern Europe Environmental Politics, Volume 13, Supplement 1, pp. 266-289(24) Baldwin R.E.;Francois J.F.;Portes R. (1997) The costs and benefits of eastern enlargement: the impact on the EU and central Europe Economic Policy, Volume 12,Number 24, pp. 125-176(52) Chemia, Gilles. (1996). Competiton, investment and vertical integration. Discussion paper - London School of Economics and Political Science Suntory Toyota International Centre for Economics and Related Disciplines ; 96/308 Suntory-Toyota International Centre for Economics and Related Disciplines, De Fontenay, Catherine. 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