Framework for assessing efficiency of farms and agrarian organizations
Broadly applied traditional frameworks for assessing efficiency of economic organizations in agriculture are (only) based on the “technical efficiency” of the factors of production and the “productivity of employed resources”. They compare the levels of efficiency of farms of different types, sectors, and countries without taking into account the transaction costs and the specific economic, institutional and natural environment of their development. At the same time, other agrarian organizations (contracts, associations, markets, public and hybrid forms) are not considered as alternative economic structures and are either ignored or studies separately. This paper suggests a new approach for assessing efficiency of economic organizations and public intervention in agriculture incorporating achievements of the interdisciplinary New Institutional Economics. Presented new approach includes: studying out the farm and agrarian organizations as a governing rather than a production structure; assessment of the comparative efficiency of alternative market, contract, internal, and hybrid modes of governance on the base of their potential to minimise production and transaction costs and to maximise the production and transaction benefits; analysis of the level of transaction costs and their institutional (distribution of rights and obligations, and the systems of their enforcements), behavioural (preferences, bounded rationality and opportunism of individuals), dimensional (uncertainty, frequency, assets specificity and appropriability of activity/transactions), technological (non-separability, economies of scale and scope) and natural factors; and determination of adequate criteria of farm efficiency and its effective boundaries – the potential to increase productivity of resources with minimum transaction costs comparing to a practically possible alternative organisation. The new approach is also used to precise the needs for public interventions (“the economic role of government”) in agrarian sector and to assess the comparative efficiency of alternative forms of public involvement. The analysis of socio-economic and natural environment and the transaction costs identifies a multiple cases of “market and private failures” associated with non-identified or badly assigned property rights, ineffective system of enforcement of absolute and contracted rights, high uncertainty and dependency of activity, low appropriability, needs for collective actions etc. which necessitate a third-party public intervention in market and private sectors. The individual forms of public involvement (institutional modernisation, assistance, regulation, taxation, hybrid or internal organisation) are with unequal efficiency in the specific environment of different countries, regions, and sectors, and the most efficient one(s) is/are to be selected with taking into account the total (direct, private, public, transaction, third-party etc.) costs and the contribution to the sustainable development. Nevertheless, “the public failure” is feasible and bad interventions, delayed, under or over-regulations, miss-management, corruption etc. are widespread and as a result the sustainable development of the sector is compromised.
|Date of creation:||Jan 2012|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dahlman, Carl J, 1979. "The Problem of Externality," Journal of Law and Economics, University of Chicago Press, vol. 22(1), pages 141-62, April.
- Bachev, Hrabrin, 2008. "Governing of agrarian sustainability," MPRA Paper 7772, University Library of Munich, Germany.
- Bachev, Hrabrin, 2008. "Governing of agrarian innovations," MPRA Paper 7784, University Library of Munich, Germany.
- Gorton, Matthew & Davidova, Sophia, 2004.
"Farm productivity and efficiency in the CEE applicant countries: a synthesis of results,"
Agricultural Economics of Agricultural Economists,
International Association of Agricultural Economists, vol. 30(1), January.
- Gorton, Matthew & Davidova, Sophia, 2004. "Farm productivity and efficiency in the CEE applicant countries: a synthesis of results," Agricultural Economics, Blackwell, vol. 30(1), pages 1-16, January.
- Eggertsson,Thrainn, 1990. "Economic Behavior and Institutions," Cambridge Books, Cambridge University Press, number 9780521348911, 1.
- Harvey S. James & Michael E. Sykuta, 2005. "Property Right and Organizational Characteristics of Producer-owned Firms and Organizational Trust," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 76(4), pages 545-580, December.
- Sykuta, Michael E. & Klein, Peter G. & James, Harvey S., Jr., 2005. "Markets, Contracts, or Integration? The Adoption, Diffusion, and Evolution of Organizational Form," 2005 Annual meeting, July 24-27, Providence, RI 19390, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Thomas Masterson, 2007. "Productivity, Technical Efficiency, and Farm Size in Paraguayan Agriculture," Economics Working Paper Archive wp_490, Levy Economics Institute.
- Bachev, Hrabrin, 2009. "Governing of Agro-Ecosystem Services," MPRA Paper 15492, University Library of Munich, Germany.
- Hrabrin Bachev, 2005. "Efficiecy Of Agrarian Organisations," Microeconomics 0511002, EconWPA.
- Erik Mathijs & Johan F. M. Swinnen, 2001. "Production Organization And Efficiency During Transition: An Empirical Analysis Of East German Agriculture," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 100-107, February.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:40136. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.