Efficiency of Governing Structures in Agriculture

15 Pages Posted: 30 Dec 2007  

Hrabrin Bachev

Institute of Agricultural Economics

Date Written: December 2007


This paper, presented in Russian, incorporates the New Institutional and Transaction Costs Economics into analysis of efficiency of agrarian organizations. Main kinds of transactions of the managers of agrarian transactions (farms entrepreneurs) are clarified as land, labor, service, inputs, and finance supply; marketing; and collective actions. The alternative market, non-market, and mixed modes for organization of different types of agrarian transitions are identified. Various types of costs associated with each form of transacting are determined and the comparative efficiency of different governance structures estimated.

Firstly, critical factors of transactions in particular institutional environment are identified. These factors affect transaction costs variation, and they are associated: with behavioral characteristic of agrarian agents (bounded rationality, tendency for opportunism, building of reputation, risk aversion, level of trusts); and with economic dimensions of individual transactions (frequency, uncertainty, assets specificity and appropriability).

Secondly, assessment is made on effective potential of alternative organizational modes to: minimize bounded rationality of agrarian agents and uncertainty associated with transacting; to appropriate and protect private investments from possible opportunism; to recover long-term investments for organizational development through high recurrence of transactions between same agents; to exploit economy of size and scale on specific for relationship with a particular partner capital etc.

Third, principal matrix of generic organizational modes is build for effective governance of transactions with different combination of critical dimensions: free market mode if effective to carry out transactions with high appropriability and low assets specificity; the special contract form is appropriate for transactions with high frequency, and increased uncertainty and assets specificity; the internal integration can manage effectively repeated transactions with high capital dependency and big uncertainty; the hybrid and public modes are the most effective forms for occasional transactions with low appropriability and high assets specificity.

Finally, effective horizontal and vertical boundaries of every specific form within each generic modes could be determined through comparison of their potential to explore economy of size (scale) on specific or (and) specialized assets, and their comparative efficiency to minimize bounded rationality and to control opportunism of counterparts.

Note: Downloadable document is in Russian.

Keywords: agrarian organization, governance, transaction costs, new institutional economics

JEL Classification: D23, L22, M13, O17, Q13

Suggested Citation

Bachev, Hrabrin, Efficiency of Governing Structures in Agriculture (December 2007). Available at SSRN: https://ssrn.com/abstract=1079323 or http://dx.doi.org/10.2139/ssrn.1079323

Hrabrin Bachev (Contact Author)

Institute of Agricultural Economics ( email )

125 Tzarigradsko shosee Blvd. Blok 1
Sofia, 1113

HOME PAGE: http://hrabrin-bachev.my.contact.bg/

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