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Understanding How Land is Exchanged: Co-ordination Mechanisms and Transaction Costs

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  • Barrie Needham

    (Nijmegen School of Management, University of Nijmegen, PO Box 9108, 6500 HK, Nijmegen, The Netherlands, b.needham@nsm.kun.nl and g.dekam@aedes.nl)

  • George de Kam

    (Nijmegen School of Management, University of Nijmegen, PO Box 9108, 6500 HK, Nijmegen, The Netherlands, g.dekam@aedes.nl)

Abstract

This paper seeks to increase our understanding of how land is exchanged between suppliers and demanders. Most current land-price theories, and the land-use models which are derived from them, assume that co-ordination between suppliers and demanders is achieved through the price mechanism. There are, however, other possible co-ordination mechanisms, including imposed rules and mutual trust. In order to take account of these, the effect of institutions has to be included in the theories. Transaction cost economics, as one strand of institutional economics, seeks to explain which co-ordination mechanism is chosen in practice. In this paper, the application of these ideas is illustrated with findings from a detailed survey of how Dutch housing associations acquire land. It appears that these housing associations choose to acquire land through the mechanism of mutual trust when there is a network in place which they can use, and to acquire through the market when that mechanism is not available. This application shows how the theoretical ideas can be operationalised and tested in practice. If this were done more widely, the assumption that price is the main co-ordination mechanism could be tested critically. The outcome would be important not only for land-price theory, but also for land-use policy.

Suggested Citation

  • Barrie Needham & George de Kam, 2004. "Understanding How Land is Exchanged: Co-ordination Mechanisms and Transaction Costs," Urban Studies, Urban Studies Journal Limited, vol. 41(10), pages 2061-2076, September.
    • Handle: RePEc:sae:urbstu:v:41:y:2004:i:10:p:2061-2076
    DOI: 10.1080/0042098042000256387
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    References listed on IDEAS

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    2. Ballesteros, Marife M., 2000. "Land Use Planning in Metro Manila and the Urban Fringe: Implications on the Land and Real Estate Market," Discussion Papers DP 2000-20, Philippine Institute for Development Studies.
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    4. Grant I. Thrall, 1987. "Land Use and Urban Form," Wholbk, Regional Research Institute, West Virginia University, number 16, July-Sept.
    5. Michael Ball, 1998. "Institutions in British Property Research: A Review," Urban Studies, Urban Studies Journal Limited, vol. 35(9), pages 1501-1517, August.
    6. Robert J. David & Shin‐Kap Han, 2004. "A systematic assessment of the empirical support for transaction cost economics," Strategic Management Journal, Wiley Blackwell, vol. 25(1), pages 39-58, January.
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    Cited by:

    1. Reshma Shrestha & Jaap Zevenbergen & Fahria Masum & Mahesh Banskota, 2018. "“Action Space” Based Urban Land Governance Pattern: Implication in Managing Informal Settlements from the Perspective of Low-Income Housing," Sustainability, MDPI, vol. 10(7), pages 1-19, June.
    2. Kangoh Lee, 2019. "Absentee ownership, land taxation and surcharge," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 62(1), pages 47-68, February.

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