Perpetuation of subsistence farming in Western Balkans: the role of factor market imperfections

The paper analyses the imperfections in output and factor markets in Kosovo that act as a barrier to farm commercialisation. On the one hand, agricultural households may not have access to output market due to an underdeveloped downstream sector. On the other, local producers might not be preferred to importers as their production level is small with a variable quality due to constraints in factor markets.

The model including wages is non-separable. Households with more members sell less as they have preferences for household needs. This calls for active rural development and educational policy which can create labour opportunities for agricultural households.