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Endogenous Transaction Costs And Tradability In A Micro Economywide Model - A Stylized Application With Nonseparable Households

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  • Kuiper, Marijke H.

Abstract

This paper analyzes effects of transaction costs on household responses, adding to direct effects via price-bands, indirect effects through reduced availability of productive resources and through changes in price formation. A micro economywide model with nonseparable household models is developed, in which transaction costs determine effective prices through an endogenous, household-specific price-band. Moreover, transaction costs influence household decisions by claiming productive resources, and by affecting endogenous prices at household or micro-economy level. Comparison of two stylized village model specifications indicates that indirect effects of transaction costs reduce household supply response, despite reducing the range of prices for which households operate within their price-band. Results show that transaction costs need to be identified in terms of commodities used for transactions, and in terms of tradability of these commodities, to account for indirect effects of transaction costs.

Suggested Citation

  • Kuiper, Marijke H., 2002. "Endogenous Transaction Costs And Tradability In A Micro Economywide Model - A Stylized Application With Nonseparable Households," 2002 Annual meeting, July 28-31, Long Beach, CA 19832, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea02:19832
    DOI: 10.22004/ag.econ.19832
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    References listed on IDEAS

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    1. 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.
    2. de Janvry, Alain & Fafchamps, M. & Sadoulet, Elisabeth, 1991. "Peasant Household Behavior with Missing Markets: Some Paradoxes Explain," CUDARE Working Papers 198579, University of California, Berkeley, Department of Agricultural and Resource Economics.
    3. Rutherford, Thomas F., 1995. "Extension of GAMS for complementarity problems arising in applied economic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 19(8), pages 1299-1324, November.
    4. Victor Ginsburgh & Michiel Keyzer, 2002. "The Structure of Applied General Equilibrium Models," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262571579, December.
    5. Hans Löfgren & Sherman Robinson, 1999. "Nonseparable Farm Household Decisions in a Computable General Equilibrium Model," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 663-670.
    6. Holden, Stein T. & Taylor, J. Edward & Hampton, Stephen, 1999. "Structural adjustment and market imperfections: a stylized village economy-wide model with non-separable farm households," Environment and Development Economics, Cambridge University Press, vol. 4(1), pages 69-87, February.
    7. de Janvry, Alain & Fafchamps, Marcel & Sadoulet, Elisabeth, 1991. "Peasant Household Behaviour with Missing Markets: Some Paradoxes Explained," Economic Journal, Royal Economic Society, vol. 101(409), pages 1400-1417, November.
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    Cited by:

    1. Shiferaw T. Feleke & Richard L. Kilmer & Christina H. Gladwin, 2005. "Determinants of food security in Southern Ethiopia at the household level," Agricultural Economics, International Association of Agricultural Economists, vol. 33(3), pages 351-363, November.
    2. Feleke, Shiferaw & Zegeye, Tesfaye, 2006. "Adoption of improved maize varieties in Southern Ethiopia: Factors and strategy options," Food Policy, Elsevier, vol. 31(5), pages 442-457, October.

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