Abstract
This research aimed to analyze the transaction cost structure and the effect of transaction costs on the revenue and profit of red chili farming. The analytical methods used were Transaction Cost Economic (TCE) analysis and multiple regression analysis. This research was conducted in Garut Regency, West Java, on 145 farm households. The research results showed that the highest percentage of transaction cost components was at implementation costs of 25.1 percent, followed by information search costs of 23.1 percent and negotiation costs of 22.3 percent. The number of transaction costs formed in red chili farming was IDR 3,990 727.74 per year. The ratio of transaction costs to total costs was 0.0285. This indicated that farmers had to issue 2.85 percent of the total costs for transaction costs. In addition, the percentages of transaction costs for revenue and profit of red chili farming were 4.65 and 5.27 percent respectively. The results also showed that five variables had significant effects on the benefits of red chili farming. The five variables included the price of chili seeds, manure, insecticides, labor wages, and transaction costs.
Highlights
Horticulture is the second largest agricultural subsector after food crops with an estimated involvement of 9.3 million farmers, or around 23% of the total 41.5 million farmers in Indonesia
Based on the theoretical and operational exemplifications, the hypotheses of this research were: (1) transaction costs on red chili farming which covered the costs of information search, implementation, sales intermediary, trading partner finding, and negotiation; The Structure of Transaction Cost on Red Chili Farming
Transaction costs in this research consisted of: (1) information search costs; (2) implementations costs, (3) trading partner searching costs; (4) sales intermediary costs; (5) negotiation costs
Summary
Horticulture is the second largest agricultural subsector after food crops with an estimated involvement of 9.3 million farmers, or around 23% of the total 41.5 million farmers in Indonesia. Based on the percentage of vegetable production in Indonesia, there are 5 (five) types of vegetable crops contributing the largest production to the total national vegetable production; i.e. cabbage (12.05%), potatoes (11.31%), shallots (10 , 35%), large chili (9.02%) and tomatoes (7.69%), while 20 other types of vegetables have less than seven% of production (Director General of Horticulture 2015). One horticultural commodity that has high economic commodity value and a strategic role in the structure of the national economy is the commodity of red chili (Saptana et al 2012). The price of red chili is very fluctuating reflected by the large numbers of supply and demand (Saptana, 2010). Commodity prices for red chilli and shallots tend to fluctuate and have a high margin level which results in inefficient established prices (Suwarsinah et al 2018)
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