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Transactions Costs and Agricultural Household Supply Response

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  • Nigel Key
  • Elisabeth Sadoulet
  • Alain De Janvry

Abstract

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. Copyright 2000, Oxford University Press.

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  • Nigel Key & Elisabeth Sadoulet & Alain De Janvry, 2000. "Transactions Costs and Agricultural Household Supply Response," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(2), pages 245-259.
  • Handle: RePEc:oup:ajagec:v:82:y:2000:i:2:p:245-259
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    File URL: http://hdl.handle.net/10.1111/0002-9092.00022
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    References listed on IDEAS

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    1. Kuhn, Betsey A. & Offutt, Susan E., 1999. "Farm Policy in an Era of Farm Diversity," Choices, Agricultural and Applied Economics Association, vol. 14(3).
    2. Giancarlo Moschini & Paolo Sckokai, 1994. "Efficiency of Decoupled Farm Programs Under Distortionary Taxation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(3), pages 362-370.
    3. Daniel A. Sumner & Christopher A. Wolf, 1996. "Quotas without Supply Control: Effects of Dairy Quota Policy in California," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 354-366.
    4. David A. Hennessy, 1998. "The Production Effects of Agricultural Income Support Policies under Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 46-57.
    5. Rucker, Randal R & Thurman, Walter N & Sumner, Daniel A, 1995. "Restricting the Market for Quota: An Analysis of Tobacco Production Rights with Corroboration from Congressional Testimony," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 142-175, February.
    6. Keith Collins & James Vertrees, 1988. "Decoupling and U.S. Farm Policy Reform," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 36(4), pages 733-745, December.
    7. Gisser, Micha, 1993. "Price Support, Acreage Controls, and Efficient Redistribution," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 584-611, August.
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