Abstract
Using field surgveyed data from two apple production belts in China, this study estimates the impact of transaction costs on smallholders’ market participation and integration. The analysis is based on an innovative measurement of the transaction costs and a disaggregated analysis of sales, information, negotiation, and monitoring costs. The results reveal that farmers’ market participation levels are mainly determined by the proportional transaction costs and price, while their market integration depends on the fixed transaction costs and price. This suggests that, to lower the transaction costs and enable specialization and market participation, it is necessary to invest in and construct adequate farming infrastructure, update the rural information system, improve the structure of farmer households, and subsidize specialized rural cooperative organizations.
Highlights
The development of agriculture continues to play a key role in the transformation of economies
Using a database of 635 Chinese apple producers, this study focuses on several determinants of farmer households, providing empirical evidence on what circumstances market integration may function under
The current study used a field survey conducted by the China Agriculture Research System (CARS) during the 2012/13 cropping season as part of a project to assess the economic impact of apple production
Summary
The development of agriculture continues to play a key role in the transformation of economies. Agricultural commercialization puts increased emphasis on specialization, which is not confined to the production of high-value crops (such as apples, the dominant type of horticultural products in China). Such transformation is often accompanied by diversification of smallholder farming toward high-value activities linked to modern markets. Sanitary and phytosanitary standards in the global market have already been tightened while new standards are being applied to address previously unknown and unregulated risks, especially in markets for high-value products Meeting these standards represents potential barriers, especially to small producers and their market intermediary organizations seeking to expand their trade opportunities in the local or global markets. Policy interventions require a clear understanding of how smallholders are affected by transaction costs and what institutional arrangements can enhance opportunities
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