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Effect of Transaction Costs on Seller Decisions among Small-Holder Cassava Farmers in South-Eastern Nigeria

Author Info

  • Okoye, B.C
  • Onyenweaku, C.E
  • Ukoha, O.O

Abstract

A linear probability model (LPM) analysis of seller decisions selling cassava on-farm (farm-gate) or off-farm (market) was derived and estimated consistent with a sample 216 farm households. Variables of proportional transaction costs have different effects on off-farm and on-farm market participation decisions. The seller type decision revealed that coefficients for have a personal means of transport, road conditions to the nearest town and marketing experience were positive and significantly related to increase in off-farm cassava sellers at 5% level of probability. The coefficient for distance from the house to the farm was negatively and significantly related to increase in farmers selling off-farm at 1% level of probability. The coefficients for crop transportation costs, distance to the nearest town, distance from the house to the farm and yield were negative and significant at 5% level of probability. These decisions to participate as an off-farm or on-farm seller were as a result of proportional transaction costs associated with participating in the market. It was found that unexpected transaction costs inhibit farm households from selling off-farm. The results therefore calls for policies aimed at infrastructural development especially on roads and establishment of bulking centers to mitigate transportation costs.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 26120.

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Date of creation: 10 Aug 2010
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Handle: RePEc:pra:mprapa:26120
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Keywords: Transaction Costs; Seller Decisions and Cassava Farmers;

Find related papers by JEL classification:

  • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
  • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
  • D2 - Microeconomics - - Production and Organizations

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  1. Binswanger, Hans P. & Khandker, Shahidur R. & Rosenzweig, Mark R., 1993. "How infrastructure and financial institutions affect agricultural output and investment in India," Journal of Development Economics, Elsevier, vol. 41(2), pages 337-366, August.
  2. 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.
  3. Marcel Fafchamps & Ruth Vargas Hill, 2004. "Selling at the farm-gate or travelling to market," CSAE Working Paper Series 2004-30, Centre for the Study of African Economies, University of Oxford.
  4. Feder, Gershon & Just, Richard E & Zilberman, David, 1985. "Adoption of Agricultural Innovations in Developing Countries: A Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 33(2), pages 255-98, January.
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Cited by:

  1. Wanjiru, Rebeccah & Owuor, George & Lagat, Job, 2012. "Decision Making in the Presence of Transaction Costs –evidence from Smallholder Banana Farmers in Murang’a County, Kenya," 2012 Eighth AFMA Congress, November 25-29, 2012, Nairobi, Kenya 159391, African Farm Management Association (AFMA).

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