Estimating Transaction Costs in Tanzanian Supply Chains
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Date
2011-04
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Abstract
Kilimo Kwanza1
emphasizes modernization and commercialization of agriculture, which entails
improving current technology used, and access and participation of smallholder farmers in markets.
However, market participation is not costless. Transaction costs exist in all market exchange, and high
transport costs, which are an element of transaction costs2
, are a major deterrent for market
participation of farmers in Africa, and they affect the price farmers receive3
as well as their productivity
(Hine and Ellis, 2001). This implies that a reduction in transaction costs can encourage smallholder
farmers to participate in marketing of their produce. In addition, and potentially more important in the
longer run, the increased prices may trigger the farmer to review his product portfolio in the light of
these new opportunities. As such, indirectly, the reductions of inefficiencies along the marketing chain
may lead to everlasting productivity gains through a reshuffle of the product portfolio of smallholder
farmers that better exploits their comparative advantage.
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Citation
Mkenda, B.K. and Van Campenhout, B., 2011. Estimating transaction costs in Tanzanian supply chains. Documento de Trabalho do Centro de Crescimento Internacional, 11, p.0898.