The concept of minimization of transaction costs of functioning of the dual market of agricultural lands

Abstract

This article provides the concept of minimizing transaction expenses for farmland market functioning, based on principles for minimizing transaction expenses on the property rights market developed by R. Coase, O. Williamson, D. North, J. Hodgson, E. Furubotn, original provisions on the dual structure of Russian agricultural land market with full and limited property rights transactions. The comparative institutional analysis of the dual market, transactors of various property types and transaction expense types demonstrates that three stages of full and limited property rights market transaction are characterized by high permanent transaction expenses related to providing data on property rights transaction, negotiations, preparing and signing contracts, as well as formal regulations. Due to high rates of transaction formalization, the full property rights market demonstrates higher expenses than the limited rights market, where expenses for long-term contractual relations are caused mainly by subjective factors and informal restrictions. The amount of expenses is unevenly distributed between transactors depending on land ownership type and form: expenses for state and municipal lands transaction, as well as for shared land ownership, are higher compared to transaction of private property rights. Some high transaction expenses are permanent and establish property rights specification and value, possible to be minimized only with time by amending legal standards and regulations in order to improve market transaction terms. Other expenses are established independently by transactors during the market exchange and can be minimized through indirect regulators changing behavioral aspects of market participants and direct regulators aimed at developing institutional and infrastructural market elements to enhance more effective usage of land resources and improve adaptive efficiency and flexibility of farmland market.