Fertilizer Markets and Allocative Efficiency

Annotation
During Russia’s economic transition, the amount of fertilizer (as well as other tradable inputs such as fuel) used in agricultural production has fallen substantially. Mineral fertilizer use in 2000 was 86 percent lower than in 1990, while since the mid 1990s Russia has exported more than 80 percent of its fertilizer output. This article examines the allocative efficiency of Russian use of fertilizer to produce grain, assessed from the point of view of both domestic and world market prices. We use the results to examine whether fertilizer is being used at its optimal level, and whether the major changes in the volumes of fertilizer use and trade during transition have been economically rational. Implications for agricultural policy in Russia are then discussed.