ESA Working Paper No. 05-04

Transaction Costs, Institutions and Smallholder Market Integration: Potato Producers in Peru

Irini Maltsoglou, Aysen Tanyeri-Abur

ABSTRACT

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Agricultural and Development Economics Division
The Food and Agriculture Organization
of the United Nations

ABSTRACT

The paper analyses the impacts of transaction costs on the degree of household market integration using survey data collected from smallholder potato farmers located in the Peruvian Andes. The analysis focuses on the impacts of transaction costs differentiated as information, negotiation and monitoring costs. Two proxies are used to measure the degree of market integration of households, namely quantity sold in the market and sales in large markets. The results show that, in addition to transport costs and market prices, information, negotiation and monitoring costs affect market integration. The study reinforces previous results and sheds light on possible policy options to support smallholders in improving their access to national and global markets.

© FAO 2005