Bachev, Hrabrin (2012): Framework for assessing efficiency of farms and agrarian organizations.
Download (194kB) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||Framework for assessing efficiency of farms and agrarian organizations|
|Keywords:||efficiency of farms and agrarian organizations; market, private and public governance|
|Subjects:||Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q13 - Agricultural Markets and Marketing ; Cooperatives ; Agribusiness
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q15 - Land Ownership and Tenure ; Land Reform ; Land Use ; Irrigation ; Agriculture and Environment
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q12 - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q18 - Agricultural Policy ; Food Policy
|Depositing User:||Hrabrin Bachev|
|Date Deposited:||18 Jul 2012 20:51|
|Last Modified:||08 Feb 2016 09:15|
Bachev, H. Efficiency of Agrarian Organizations, Farm Management and Rural Planning. No 5 (2004): 135-150.
Bachev, H. Governing of Agro-ecosystem Services. Modes, Efficiency, Perspectives, Saarbrücken: VDM Verlag (2009).
Bachev, H. Governance of Agrarian Sustainability. New York: Nova Science Publishers. (2010).
Bachev, H. Management of Farm Contracts and Competitiveness, Saarbrücken: VDM Verlag (2010).
Bachev, H. Governing of Contractual Relations in Transitional Agriculture, in Thomas L. Wouters (editor), Progress in Economics Research. Volume 20, New York: Nova Science Publishers. (2011): 1-89.
Bachev, H. and M.Labonne. About Organization of Agrarian Innovations. Montpellier: INRA, (2000).
Bachev, H. and Tsuji, M. Governing of Agrarian Transactions. Management and Rural Planning II (2001): 185-202.
Coase, RThe Nature of the Firm, Economica 4 (1937): 386-405. Coase, R. The Problem of Social Costs, Journal of Law and Economics 3 (1960): 1-44.
Csáki, C. and Lerman, Z. Structural change in the farming sectors in Central and Eastern Europe. World Bank Technical Paper Volume 465, Washington DC (2000).
Dahlman, C. The problem of Externality. Journal of Law and Economics 22, (1979): 141-162.
Eggertsson, T. Economic Behavior and Institutions. New York: Cambridge University Press (1990).
Furuboth, E., and Richter, R. (1998). Institutions and Economic Theory: The Contribution of the New Institutional Economics. Ann Arbor: The University of Michigan Press (1998).
Gortona, M. and S. Davidova. Farm productivity and efficiency in the CEE applicant countries: a synthesis of results, Elsevier B.V. (2003).
Harvey, J., Klein, P. and Sykuta M. Markets, Contracts, or Integration? The Adoption, Diffusion, and Evolution of Organizational Form, CORI Working Paper No. 2007-01 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=980301##
Harvey, J. and Sykuta M. Property Right and Organizational Characteristics of Producer-Owned Firms and Organizational Trust, Annals of Public and Cooperative Economics, 76 no. 4 (2005): 545-580.
Masterson, T. Productivity, Technical Efficiency, and Farm Size in Paraguayan Agriculture, Levy Economics Institute (2007).
Mathijs, E. and Swinnen J. Production Organization and Efficiency during Transition: An Empirical Analysis of East German Agriculture, Policy Research Group, Working Paper No. 7 (1997).
Mori, T. The History of Japanese Agriculture, in Agricultural Policy in Japan, XXI IAAE Conference, Tokyo (1991).
North, D. Institutions, Institutional Change and Economic Performance. Cambridge: Cambridge University Press (1990).
Olson, M. The Logic of Collective Actions: Public Goods and the Theory of Groups. Cambridge: Harvard University Press, 1969.
Pigou, A. Economics of Welfare. London: Macmillan and Co. (1920).
Sporleder, T. Managerial Economics of Vertically Coordinated Agricultural Firms, American Journal of Agricultural Economics, Vo l 74, No 5 (1992): 1226-1231.
Williamson, О. The Economics of Organization. The American Journal of Sociology 87 (3) (1981): 548–577.
Williamson, O. The Mechanisms of Governance. New York: Oxford University Press (1996).