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Measuring the effect of transaction costs for investment in irrigation pumps: Application of unobserved stochastic threshold model to the case of Nigeria

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  • Takeshima, Hiroyuki
  • Adeoti, Adetola I.
  • Salau, Sheu

Abstract

Small-scale private irrigation schemes (SPRI) have been the driving force behind the expansion of irrigated areas in Nigeria, despite government efforts to promote large-scale public irrigation schemes. SPRI allows adjustment of irrigation schedules in accordance with observed crop needs. The irrigated area in Nigeria is, however, far below its potential and an increase in farmers� investment in irrigation is essential. While Nigerian farmers� low level of investment in irrigation may be partly due to low returns, it is also the result of high transaction costs associated specifically with making such an investment. Although reducing transaction costs is important because the reduction provides farmers with a more enabling environment, transaction costs are often unobservable and little is known about what factors contribute to them. This article empirically assesses the effect of unobserved transaction costs for Nigerian farmers� when investing in irrigation pumps, using the baseline survey data for the Second Fadama Development Program (Fadama II). The results indicate that the unobserved transaction costs are higher for female landless farmers, with higher dependency ratio and residing far from town. The results suggest that the unobserved transaction costs can be as important as the factors determining the profitability of irrigation pump, emphasizing the importance of reducing transaction costs in addition to improving the environment for higher return from irrigation investment.

Suggested Citation

  • Takeshima, Hiroyuki & Adeoti, Adetola I. & Salau, Sheu, 2010. "Measuring the effect of transaction costs for investment in irrigation pumps: Application of unobserved stochastic threshold model to the case of Nigeria," NSSP working papers 15, International Food Policy Research Institute (IFPRI).
    • Handle: RePEc:fpr:nsspwp:15
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    Cited by:

    1. Takeshima, Hiroyuki & Edeh, Hyacinth, 2013. "Typology of farm households and irrigation systems: Some evidence from Nigeria," IFPRI discussion papers 1267, International Food Policy Research Institute (IFPRI).
    2. Giordano, Meredith & de Fraiture, Charlotte, 2014. "Small private irrigation: Enhancing benefits and managing trade-offs," Agricultural Water Management, Elsevier, vol. 131(C), pages 175-182.
    3. Barrett,Christopher B. & Sheahan,Megan Britney & Barrett,Christopher B. & Sheahan,Megan Britney, 2014. "Understanding the agricultural input landscape in Sub-Saharan Africa : recent plot, household, and community-level evidence," Policy Research Working Paper Series 7014, The World Bank.
    4. de Fraiture, Charlotte & Giordano, Meredith, 2014. "Small private irrigation: A thriving but overlooked sector," Agricultural Water Management, Elsevier, vol. 131(C), pages 167-174.
    5. Takeshima, Hiroyuki & Adeoti, Adetola I. & Okoli, Silas & Salau, Sheu & Rhoe, Valerie, 2010. "Demand characteristics for small-scale private irrigation technologies: Knowledge gaps in Nigeria," NSSP working papers 18, International Food Policy Research Institute (IFPRI).
    6. Okello, Julius J. & Kwikiriza, Norman & Kakuhenire, Rogers & Parker, Monica & Schulte-Geldermann, Elmar & Pambo, Kennedy, 2015. "Micro and meso-level issues affecting potato production and marketing in the tropical highlands of Sub-Saharan Africa: The known and the unknowns," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205464, Agricultural and Applied Economics Association.
    7. Srinivas Chokkakula & Mark Giordano, 2013. "Do policy and institutional factors explain the low levels of smallholder groundwater use in Sub-Saharan Africa?," Water International, Taylor & Francis Journals, vol. 38(6), pages 790-808, October.
    8. Takeshima, Hiroyuki & Adhikari, Rajendra Prasad & Kumar, Anjani, 2016. "Is access to tractor service a binding constraint for Nepali Terai farmers? :," IFPRI discussion papers 1508, International Food Policy Research Institute (IFPRI).
    9. Takeshima, Hiroyuki, 2015. "Identifying the effects of market imperfections for a scale biased agricultural technology: Tractors in Nigeria," 2015 Conference, August 9-14, 2015, Milan, Italy 211937, International Association of Agricultural Economists.

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