Specialized Apple Growers' Economy Behavior

In the transition economy,both market and government begin to play roles in resources allocation and the contradict and mixture of these two powers as well as the edge of price mechanism and bureaucrat make economists confused for a long time.As a result of institution imperfection and market failure,transaction costs lead to some distortion of market participators and quite a lot of puzzled economy phenomenon.In the rural areas,the coexistence of market integration and farmer households organized,the co-occurrence of agricultural production area specialization,agriculture marginalization,and farmers' part-time operation.These conflicts and challenges require some deeply theoretical analysis and explanations eagerly.Meanwhile,the New Institutional Economic approach suggests that,one possible explanation for the previous phononmenas are high transaction costs.Specifically,transaction costs prevent farmer's factor market and output market participation,stimulate farmer to join self-organition and vertical coordination and determine farmer's contract choice.Therefore,to examine the specialized farmers' economy behavior in the presence with transaction costs are the fundamental to understand how and why are the economy behavior is distortioned.Against this background,the purpose of this research is to answer the fowllowing questions: how transaction costs affect farmer's resource allocation and output market participation? What institutional innovation and policy innovation could be induced by transaction costs? What is the cut-point of nstitutional innovation and policy innovation? In order to descipe these questions,this paper makes theoretical and empirical analysis on the affect of transaction costs on farmer's resource allocation and output market participation,and comes up with policy impilications based on the empirical results.The context and findings of this paper could be summarized as fowllowing.(1)The effect of transaction costs on farmer's resource allocationIn the factor market,scale size of crop land is the foundation and initial condition of modern agriculture.However,the conflict between the necessity,urgency of land tenancy and latency of reality is quite obvious.Therefore,the cropland reallocation functions not very well.If we divide the land tenancy into two parts:Whether rent in and the scale,whether farmers rent in the land or not mainly depends on physical assets specialty,human resource specialty and risk.The scale of land renting in are decided by the marginal profit of cropland,production ability,negotiation cost,searching cost and enforcement cost.The effects of tenancy cropland price are not significant.In the technical market,fixed transaction costs reduce farmers' technology access.The Further farmers' away from the technology resource,the lower access to technology.Variable transaction costs,especially the information costs restrain farmers' technology adoption and,the more information asymmetry,the higher possibility to adopt new technology.Both the fixed transaction cost and variable cost in output market have significant effect on farmers' technology adoption.Specifically,perennial cash crop requires higher physical asset investment than crops and the physical specialized asset usually combines with professional human resources,which character that production facilities matching with the specialization of technology and management.(2)The effect of transaction costs on farmer's output market participationThe purpose of this part is to illustrate how transaction costs affect farmer's ouput market participation and market channel choice.The empirical analysis indicates that in the output market,assets specialty leads to some increase of transaction costs,market risk and uncertainty.Therefore,a rational choice is to enlarge the management size and strengthen the comparative capability.The empirical results suggest that the distance to market have negative effect on farmers' market participation,so does transportation mode.The “rent of every unit apple orchard” and “agri-labor cost during busy time” have obvious statistical effect,but not economical.The effect from agricultural output trade settlement on farmers' market participation are so significant that the efficient step to advance the match of farmers and market is to reduce the transaction costs.For instance,to strengthen the vertical coordination of labor-intensive crop makes it possible to reduce transition costs of market partners by sharing profits and risks.At the same time,aiming at protecting participants' profits,it's also necessary to build an enforceable legal system.Other policy implications like enhancing the agricultural industry organization innovation,optimizing public policy efficiency and increasing agricultural outsourcing and diversification to improve farmers' market participation and specialization.In the output market,cost of searching information is a hard constrain faced by farmers.Because of the lack of instant and reliable information source,there is an “information trap”.The regression result of negotiation cost indicate that farmers' negotiation power are so limited that it's a dilemma choice between transaction costs and market surplus.Enforcement costs,especially trade settlement and default have significant effect on farmers' market channel choice.Because the participation of rural professional cooperation organization helps them to get the advantage of information asymmetry and scale and reduce the searching cost,marketing environment has significant effect on channel choice.The effect of farmer household characters on channel choice are not significant.(3)How to reduce farmer's transaction costs of farm householdOverall,the previous research suggests that,it's very necessary to advance the institution innovation for land tenancy market orderly,reduce farmers' crop land transaction costs.At the same time,to define the edge of government and market and reduce the technical market transaction costs.Finally,Government should enhance agriculture supply chain vertical integration to reduce farmers' output market transaction costs.