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Transaction Costs And Organic Marketing: Evidence From U.S. Organic Produce Farmers

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  • MacInnis, Bo

Abstract

We develop a conceptual framework that integrates quality of output and transaction costs in the choice of marketing channels. We estimate a reduced-form Tobit model and a semi-reduced logit model using a farm-level cross-sectional dataset to measure the effects of transaction costs in farming ability to make sales to indirect markets (retailers and wholesalers). We find strong empirical evidence that existing organic retail and wholesale markets impose considerable barriers to entry on individual organic farmers. The effects of transaction costs are asymmetric between farmers, those who transitioned from conventional farming and those who did not. Those who did are overall favored, and those who did not are constrained by more types of transaction costs and are constrained more severely than those who did. We argue that an effective policy should target the least favored farmers by encouraging or mandating distributors and retailers have a more transparent and objective process in selecting organic suppliers, such that all farmers would have an equal opportunity to be successful in selling to indirect markets.

Suggested Citation

  • MacInnis, Bo, 2004. "Transaction Costs And Organic Marketing: Evidence From U.S. Organic Produce Farmers," 2004 Annual meeting, August 1-4, Denver, CO 20386, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea04:20386
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    File URL: http://purl.umn.edu/20386
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    References listed on IDEAS

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    1. Nelson, Forrest & Olson, Lawrence, 1978. "Specification and Estimation of a Simultaneous-Equation Model with Limited Dependent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(3), pages 695-709, October.
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    4. KS Pietola & AO Lansink, 2001. "Farmer response to policies promoting organic farming technologies in Finland," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 28(1), pages 1-15, March.
    5. Dimitri, Carolyn & Greene, Catherine R., 2002. "Recent Growth Patterns In The U.S. Organic Foods Market," Agricultural Information Bulletins 33715, United States Department of Agriculture, Economic Research Service.
    6. Bailey, DeeVon & Hunnicutt, Lynn, 2002. "The Role Of Transaction Costs In Market Selection: Market Selection In Commercial Feeder Cattle Operations," 2002 Annual meeting, July 28-31, Long Beach, CA 19894, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Lohr, Luanne & Gonzalez-Alvarez, Yassert & Graf, Anita, 2001. "Predicting Organic Market Development With Spatial Analysis Of Existing Industry Information," 2001 Annual meeting, August 5-8, Chicago, IL 20511, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Steven Were Omamo, 1998. "Transport Costs and Smallholder Cropping Choices: An Application to Siaya District, Kenya," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 116-123.
    9. Karen Klonsky & Laura Tourte, 1998. "Organic Agricultural Production in the United States: Debates and Directions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(5), pages 1119-1124.
    10. Greene, Catherine R., 2001. "U.S. Organic Farming Emerges in the 1990s: Adoption of Certified Systems," Agricultural Information Bulletins 33777, United States Department of Agriculture, Economic Research Service.
    11. Stephan J. Goetz, 1992. "A Selectivity Model of Household Food Marketing Behavior in Sub-Saharan Africa," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(2), pages 444-452.
    12. Jill E. Hobbs, 1997. "Measuring the Importance of Transaction Costs in Cattle Marketing," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1083-1095.
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    Cited by:

    1. Wossink, Ada & Kuminoff, Nicolai V., 2005. "Valuing the Option to Switch to Organic Farming: An Application to U.S. Corn and Soybeans," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24716, European Association of Agricultural Economists.
    2. Uematsu, Hiroki & Mishra, Ashok K., 2012. "Organic farmers or conventional farmers: Where's the money?," Ecological Economics, Elsevier, vol. 78(C), pages 55-62.
    3. Dabbert, Stephan & Lippert, Christian & Zorn, Alexander, 2014. "Introduction to the special section on organic certification systems: Policy issues and research topics," Food Policy, Elsevier, vol. 49(P2), pages 425-428.
    4. Kuminoff, Nicolai V. & Wossink, Ada, 2005. "Valuing the Option to Convert from Conventional to Organic Farming," 2005 Annual meeting, July 24-27, Providence, RI 19531, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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