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Determinants of Transaction Costs to Farmers Participation in Groups from Mbozi District in Tanzania

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  • Lwezaura, Deogratias
  • Ngaruko, Deus

Abstract

Farmers are often encouraged to form producer groups to facilitate their access to markets in an effort to overcome transaction costs and enjoy economies of scale, which is often advocated in the collective action literature. The role of transaction costs in participation of smallholder farmers groups is attempts that underpin the present paper. The study uses a cross-section data of a sample size of 310 farmers collected from Mbozi District of Tanzania. They include variables capturing transaction costs on farmers’ participation in groups. A model that can be used to capture elements of transaction costs while explaining influences for farmers’ participation in groups is specified and used in the analysis. Variables capturing transaction costs explaining decisions costs (including information gathering, contracting and negotiating) of farmers to participate in groups are demonstrated and used in the analysis. In light of transaction cost literature only three variables that show significant effect include registration fee or cost of joining a group, distance that captures access to a group meeting place and membership to a market oriented group. Based on the findings, we conclude that policies focusing to lowering transaction costs through improved transportation, lowering participation fee and promotion of marketing oriented farmer groups would increase farmers’ decision to participate in groups and increase group participants.

Suggested Citation

  • Lwezaura, Deogratias & Ngaruko, Deus, 2013. "Determinants of Transaction Costs to Farmers Participation in Groups from Mbozi District in Tanzania," African Journal of Economic Review, African Journal of Economic Review, vol. 1(1), January.
  • Handle: RePEc:ags:afjecr:264285
    DOI: 10.22004/ag.econ.264285
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    References listed on IDEAS

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    1. Oliver E. Williamson, 2000. "The New Institutional Economics: Taking Stock, Looking Ahead," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 595-613, September.
    2. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    3. Poulton, Colin & Dorward, Andrew & Kydd, Jonathan, 2010. "The Future of Small Farms: New Directions for Services, Institutions, and Intermediation," World Development, Elsevier, vol. 38(10), pages 1413-1428, October.
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    Cited by:

    1. Mutayoba, Venance & Ngaruko, Deus, 2015. "Determinants of Farmers’ participation in high value crops in Tanzania," African Journal of Economic Review, African Journal of Economic Review, vol. 3(2), July.

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    Keywords

    Agribusiness; Farm Management;

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