Governing of labor supply in Bulgarian farms - modes, factors, post-transition evolution

Bachev, Hrabrin (2025): Governing of labor supply in Bulgarian farms - modes, factors, post-transition evolution.

Abstract

The goal of this article is to identify contemporary modes and factors of labor supply in Bulgarian farms. Interdisciplinary New Institutional Economics methodology is incorporated, and an analysis is made of new representative micro data collected from the managers of farms of different types and locations. There has been enormous development in labor supply governance in Bulgarian farms during the last two decades. Permanent employment is a major form of labor supply in farms, followed by seasonal and part-time employment. Owners and family members account for the largest share of the total workforce. Different forms are used (high recurrence of contracts with the same person, output-based compensation, use of service supply or input contracts, etc.) to reduce transaction costs of labor and overall governance of farms. The reasons for using employment contracts and the importance of different labor supply and governance modes, intensity of transactions, types of partners, and kinds of remuneration vary considerably depending on juridical type, size, specialization, and locations of holdings. The most important problems in hiring labor are the lack of labor in the labor market, the high price of hired labor, requirement to pay social payments, pay-holidays, etc., big turnover of workers, high costs for adapting official labor standards, high costs for controlling of hired labor (cheating, stealing, etc.), high costs for negotiating conditions of employment, high costs to find good workers, low qualification of hired labor, advance age of hired labor, requirement for signing a written contract, and insufficient initiatives of workers. For a significant number of Bulgarian farms, the costs for finding needed labor, and the amount of costs for managing the hired labor and workers in the farm are factors strongly restricting the development of their enterprise. The latter is particularly important for a good proportion of major commercial farms like cooperatives, physical persons, and corporations, to a lesser extent for sole traders. Other critical factors strongly restricting development of Bulgarian farms at present stage of development are: legislation and regulation environment in the country and sector, the amount of costs for finding needed lands and natural resources, amount of costs for finding needed short-term and long-term assets, amount of costs for finding needed finance for the farms, amount of costs for finding needed innovations, amount of costs for marketing of output, amount of costs for registration, certification, etc., existence of informal and gray sector in agriculture, and socio-economic situation in the region and in the country.

• Item Type: MPRA Paper
• Language: English
• Keywords: governance, labor supply, modes, costs, new institutional economics
• Subjects: J - Labor and Demographic Economics > J0 - General; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q12 - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q13 - Agricultural Markets and Marketing ; Cooperatives ; Agribusiness; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q15 - Land Ownership and Tenure ; Land Reform ; Land Use ; Irrigation ; Agriculture and Environment; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q18 - Agricultural Policy ; Food Policy

References

24 Chasa (2025). 64% of Bulgarians are willing to work without an employment contract, 5.02.2025. Issue (in Bulgarian) https://www.24chasa.bg/biznes/article/19856744

Agrawal, P. (1999). Contractual structure in agriculture. - Journal of Economic Behavior & Organization, 39(3), pp.293-325, https://doi.org/10.1016/S0167-2681(99)00037-2

Allen, D. and D. Lueck (2008). Agricultural Contracts, in Menard C. and M.Shirley (Editors) Handbook of New Institutional Economics. Springer-Verlag Berlin Heidelberg, 465-490.

Agro-Governance Project (2024). The Mechanisms and the Modes of Agrarian Governance in Bulgaria. IAE. Available at: https://agro-governance.alle.bg/ [Accessed 1 April 2025].

Agrarian Report (2023). Annual Report for State and Development of Agriculture. Sofia: MAF.

Bachev, H. and Ivanov, B. (2025). Unpacking the Governance of Land Supply in Bulgarian Farms, Economic Studies, Vol. 34, No 6, 179-205.

Bachev, H., Terziev, D. (2002). Organization of labor supply in Bulgarian farms. - Economics and Management of Agriculture, 1, pp.21-30 (in Bulgarian).

Bachev, H., Terziev, D. (2019). Sustainability of Agricultural Industries in Bulgaria. Journal of Applied Economic Sciences, 14 (1).

Bachev, H., Tsuji, M. (2001). Structures for organization of transactions in Bulgarian agriculture. - Journal of the Faculty of Agriculture of Kyushu University, 46. pp. 123-151.

Bachev, H. (2010). Governance of Agrarian Sustainability. New York: Nova Science Publishers.

Bachev, H. (2016). Sustainability of farming enterprise-understanding, governance, evaluation, Вісник Киiвського нацiонального унiверситету iм. Тараса Шевченка. Серiя: Економiка, 2 (179), pp. 6-15

Bachev, H. (2022). An Approach to Assess the Governance Efficiency of Bulgarian Farms, Economic-Alternatives, 4, 769-787.

Bachev, H. (2023). Agrarian Governance - Who, What, Why, How, Where, When, Price, Level? - Theoretical and Practical Research in Economic Fields, 14, 105–125.

Bachev, H. (2022). An Approach to Assess the Governance Efficiency of Bulgarian Farms. - Economic Alternatives, 4, pp. 769-787.

Bachev, H. (2024). Economic Dimensions of Agrarian Contracting. - Theoretical and Practical Research in Economic Fields, 2, pp. 288-318.

Bachev, H., Ivanov, B. (2024). Framework for Holistic Assessment of the Quality of Agri-food Governance in Bulgaria. - Sustainability, 16 (5), 2177. https://doi.org/10.3390/su16052177

BTV (2025), Fictitious employment contracts and low wages: The main workplace violations for 2024, 07.02.2025 Issue (in Bulgarian) https://btvnovinite.bg/bulgaria/fiktivni-trudovi-dogovori-i-niski-zaplati-osnovnite-narushenija-na-rabotnoto-mjasto-prez-2024-g.html

Capital (2024), Agricultural subsidies only against workers' rights from 2025, 25.10.24 Issue (in Bulgarian) https://www.capital.bg/biznes/zemedelie/2024/10/25/4691857_agrosubsidii_samo_sreshtu_prava_na_rabotnicite_ot_2025/

Coase, R. (1998). The New Institutional Economics. – American Economic Review, 88, pp. 72–74.

Currie, J. (1981). The Economic Theory of Agricultural Land Tenure. Cambridge: Cambridge University Press.

Furubotn, E., Richter, R. (2005). Institutions and Economic Theory: The Contribution of the New Institutional Economics. Ann Arbor: The University of Michigan Press.

Georgiev, M. (2024). Agricultural land, governance, and institutional change: Evidence from a Bulgarian study. - Journal of Infrastructure, Policy and Development, 8 (6), pp. 1-23. https://doi.org/10.24294/jipd.v8i6.4304

Georgiev M., Stoeva, T., Dirimanova, V. (2023). The governance structure of agricultural land contracts–discrete structural alternatives. - Bulgarian Journal of Agricultural Science, 29 (Suppl. 1), pp. 71-83.

Guo, Y., Cui, M., Xu, Z. (2023). Performance Environment, Contract Binding, and the Contract Structure of the Farmland Transfer Market. - Land, 12, 1582. https://doi.org/10.3390/ land12081582

James, H., Klein, P., Sykuta, M. (2011). The Adoption, Diffusion, and Evolution of Organizational Form: Insights from the Agrifood Sector. - Management Decision Economics, 32, pp. 243–259.

Hayami, Y., Otsuka, K. (1993). The Economics of Contract Choice: An Agrarian Perspective. Oxford: Oxford University Press.

He, Y., Collins A. (2021). The effect of information structure on farmland contractual choice: toward a revised theory of share tenancy with new evidence from Guangdong, China. - International Review of Law and Economics, 65, 105949, https://doi.org/10.1016/j.irle.2020.105949.

Léger-Bosch, C. (2019). Farmland Tenure and Transaction Costs: Public and Collectively Owned Land vs Conventional Coordination Mechanisms in France. - Canadian Journal of Agricultural Economics, 67 (3), pp.283-301.

MAF (2023). Census of Agricultural Farms in Bulgaria in 2020. Sofia: MAF.

Ménard, C., Shirley, M. (2022). Advanced Introduction to New Institutional Economics, Cheltenham: Edward Elgar Publishing.

Mihaela Mihailova (2024): Classification of contracts used in agriculture based on literature review, Bulgarian Journal of Agricultural Economics and Management, 69 (2), pp. 3-20 https://doi.org/10.61308/BEEM5142

Ostrom, E. (2009), Beyond Markets and States: Polycentric Governance of Complex Economic Systems. Nobel Prize Lecture, 8 December 2009. Nashville: American Economic Association.

Otsuka, K., Chuma, H., Hayami, Y. (1992). Land and Labor Contracts in Agrarian Economies: Theories and Facts. - Journal of Economic Literature, 30, pp. 1965-2018.

Royer, J. (2014). The Theory of Agricultural Cooperatives: A Neoclassical Primer. Faculty Publications: Agricultural Economics. 123. Lincoln: University of Nebraska. Available at: http://digitalcommons.unl.edu/ageconfacpub/123 [Accessed 1 October 2024].

Roumasset, J., Uy, M. (1986). Agency Costs and the Agricultural Firm. - Center Discussion Paper, No. 501. New Haven: Yale University.

Sykuta, M., Cook, M. (2001). A New Institutional Economics Approach to Contracts and Cooperatives. - American Journal of Agricultural Economics, 83(5), pp.1273-1279.

Vandenberghe, A. (2009). Employment Contracts, in: Kenneth G. Dau-Schmidt & Seth D. Harris & Orly Lobel (ed.), Labor and Employment Law and Economics, Edward Elgar Publishing.

Williamson, O. (2005). The Economics of Governance. - American Economic Review, 95, pp. 1–18.

Zang, D., Yang, S., Li, F. (2022). The Relationship between Land Transfer and Agricultural Green Production: A Collaborative Test Based on Theory and Data. - Agriculture, 12, 1824, https://doi.org/10.3390/agriculture12111824

Х Башев, Ш Че (2018). Управление и оценка на аграрната устойчивост в България и Китай (GOVERNING AND ASSESSMENT OF AGRARIAN SUSTAINABILITY IN BULGARIA AND CHINA), Институт по аграрна икономика.

H Bashev (2012). Ефективност на фермите и аграрните организации, Икономическа мисъл, 4, 46-77.

Х Башев, Д Терзиев (2002). Организация на снабдяването с материални активи в Българските ферми, Икономика и управление на селското стопанство, 2, 17-24.

Х Башев, Д Терзиев (2002). Организация на снабдяването с услуги в българските ферми, Икономика и управление на селското стопанство, 3, 20-28.