Transactions Costs and Agricultural Household Supply Response

We develop and estimate a model of supply response when transactions costs create a situation where some producers buy, others sell, and others do not participate in markets. We present two rationales for why producing households may have different relationships to the market: proportional and fixed...

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Bibliographic Details
Published in:American journal of agricultural economics 2000-05, Vol.82 (2), p.245-259
Main Authors: Key, Nigel, Sadoulet, Elisabeth, Janvry, Alain De
Format: Article
Language:English
Subjects:
Agricultural economics
Bid prices
Capital costs
Cost estimation models
Costs
Crops
Market economies
market participation
Market prices
O130
P values
Participation
Q110
Selling price
Supply
Transaction costs
transactions costs
Utility rates
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Summary:We develop and estimate a model of supply response when transactions costs create a situation where some producers buy, others sell, and others do not participate in markets. We present two rationales for why producing households may have different relationships to the market: proportional and fixed transactions costs. Using data on Mexican corn producers, we estimate an empirical model that allows for separate tests of the significance of both types of transactions costs, revealing that both fixed and proportional transactions costs matter for the estimation. The results provide consistent estimates of supply elasticity and measures of the relative importance of factors determining both proportional and fixed transactions costs.
ISSN:0002-9092
1467-8276
DOI:10.1111/0002-9092.00022