Effect of transaction costs on farmers' market participation in the Philippines rice sector
2015
Cuevas, A.C. | Clarete, R.L.
A market participation model with transaction costs was utilized to look into the effects of different transaction cost variables on farmers' rice market participation as a net seller. The results showed that the coefficients of the rice farming as the main source of income, irrigation, farm size, access to informal credit, and wage rate variables have the expected signs and are highly significant while the coefficients of the first class municipalities and cities, distance from the nearest wholesale markets, and number of years of education variables are significant at the 10%. These variables affect the farmers' decision on whether to participate in the market or not. On the other hand, except for the distance to the nearest wholesale market, farm experience and land ownership, all other explanatory variables have an effect on marketed supply with all coefficients having the expected signs. Marginal effects, both conditional and unconditional, were also computed. The marginal effect decompositions for the irrigation, farm size, access to informal credit, number of years of education and the first class municipalities and cities variables showed that increase in marketed supply can be attributed to both increased market participation and increased marketed supply among participants.
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