Transaction costs, crop-livestock integration participation, and income effects in China

Abstract

The crop-livestock integration model is the main path for the sustainable development of agriculture and animal husbandry in China, and farmers' participation behavior is critical to the formation of this model. So this paper based on a field survey data of 615 farmers in 10 pilot counties of Crop-Livestock Integration (CLI) in the dairy industry in the east, middle, and west of Inner Mongolia, the relationship among transaction costs, farmers' decision-making of participating in the CLI model, and income effects was analyzed using the Endogenous Switching Regression (ESR) model in this paper. The results show that under the current market environment, the proportion of farmers participating in the CLI model is 37.56% of the farmer surveyed. The high costs of information searching, negotiation, and execution are the critical factors to inhibit farmers from participating in the CLI model. The results of the counterfactual test of the ESR model show that the effect of the CLI model on the income of participated farmers is not noticeable, while the effect is more significant on the income of non-participating farmers. Moreover, there is no obvious heterogeneity in the effects of the farmer level and “farmers-to-farm” level CLI models on farmers' income. Based on these conclusions, this paper proposes that the government should actively promote the establishment of the information-sharing platform and training mechanism about the CLI model, reduce farmers' costs in information searching and negotiation, optimize the incentive policy of the CLI model, incorporate the farmers planting forage into the subsidy scope of the CLI model, improve the economic benefits of farmers participating in the CLI model, and stimulate the enthusiasm of farmers participating in the CLI model, so as to effectively promote the realization of the CLI model in the animal husbandry industry.