Transaction costs and agricultural household supply: response of sweetpotato farmers in Kwara State of Nigeria.

Abstract

Abstract Transaction costs arise in the course of market exchange and involve the cost of information, search, negotiation, screening, monitoring, coordination and enforcement. These are costs related exclusively to coordination of exchange among market actors that are distinct from the physical costs of transferring goods, such as transport, handling and storage costs. Transaction costs vary by individual, leading to heterogeneous market behaviours. This chapter looks into the relationship between transaction costs and household supply response among sweetpotato farmers in Kwara State. A multistage random sampling technique was employed in selecting 120 respondents for the study. A structured interview schedule was used to collect data from the respondents in September-October 2012. Data were analysed using descriptive statistics and an estimation Cobb-Douglas regression model. The descriptive analysis revealed the mean age of respondents was 43 years, of which 81% were male. Only 18% of the sample had no formal education and more than half of the respondents (65%) had farming as their main occupation. Thirty-nine per cent of the respondents cultivated less than 1 ha of land, 53% cultivated 1-2 ha while 8% cultivated above 2 ha. Farmers in the study area grow sweetpotato on a small-scale level. The majority (71%) of sweetpotato farming households used their personal savings to finance cultivation. The elasticity of supply response showed that with respect to price, area of land cultivated, negotiation cost, agent's fee, harvesting cost, assemblage cost, storage cost, transportation cost and land rent transactions cost, a 10% change in each of the variables resulted in 7.2%, 10.5%, 1.0%, 13.4%, 4.8%, 0.8%, 1.2%, 1.5% and 9.3% variation in the quantity of sweetpotatoes supplied to households, respectively. The adjusted R-squared (R2) was 0.734, showing that 73.4% of the variations in quantity of sweetpotato supplied were explained by the estimated variables. Results showed that significant relationships exist between transaction costs and agricultural household supply response in the study area. Hence, reducing transaction costs will complement price policies in affecting the supply response. Policy recommendations based on these results are made.