Trend Scenarios for the Impact of Smart Contracts on Transaction Costs in Agricultural Enterprises
DOI:
https://doi.org/10.61308/MXCY8192Keywords:
smart contracts, transaction costs, blockchain, economic efficiency, institutional economicsAbstract
The article examines the impact of New Institutional Economics (NIE) on the agricultural sector, focusing on the role of smart contracts in reducing transaction costs and enhancing economic efficiency. NIE considers institutions as key factors for coordinating and managing economic interactions, particularly under conditions of high uncertainty, asset specificity, and opportunistic behavior. Smart contracts, based on blockchain technology, are presented as an innovative mechanism for automating the processes of negotiation, monitoring, and contract enforcement. They eliminate the need for intermediaries, minimize the risk of human error, and increase transparency within the value chain. Using stochastic models, the article evaluates the cost-effectiveness of direct inputs, contract work, and debt servicing under three scenarios – baseline, optimistic, and pessimistic. The results demonstrate the significant potential of smart contracts to transform the agricultural sector by reducing transaction costs and improving profitability, especially under full adoption. However, their implementation is constrained by underdeveloped infrastructure, a lack of technological expertise, and regulatory uncertainties. The article highlights the need for targeted institutional support to overcome these barriers. This study contributes to the literature through an interdisciplinary approach that integrates theoretical models and practical analyses, providing a foundation for the development of sustainable policies in the agricultural sector.
References
Amare, M., Zavale, H., & Smart, J.(2024). Agribusiness innovation, value chain interventions, farmer input use, agricultural productivity, land access and asset ownership. European Review of Agricultural Economics, jbae027. https://doi.org/10.1093/erae/jbae027
Bachev, H. (2023). Podhod za definirane i analizirane na agrarnoto upravlenie (governance) [Approach for defining and analyzing agrarian governance]. Iko- nomicheski i Sotsialni Alternativi, 3, 5-25. Retrieved from https://www.unwe.bg/doi/alternativi/2023.3/ISA.2023.3.01.pdf
Bachev, H., & Ivanov, B. (2024). Quality assessment of agrarian governance in Bulgaria. Sustainability, 16(5), Article 1234. https://doi.org/10.3390/su16051234
Ballaji, N. (2024). Smart Contracts: Legal Implications in the Age of Automation. Beijing Law Review, 15, 1015-1032.
Binti Man, N., Kadhim, Z. R., Abd Latif, I., & Seng, K.W. K. (2017). The role and importance of the transactions costs theory in agricultural contracting area: an appraisal of selected empirical studies. IOSR Journal of Business and Management, 19(1), 79-89. https://doi.org/10.9790/487X-1901057989
Coase, R. H. (1937). The nature of the firm. Economica,
(16), 386-405. https://doi.org/10.1111/j.1468-0335.1937.tb00002.x
Cong, L. W., & He, Z. (2019). Blockchain disruption and smart contracts. The Review of Financial Studies, 32(5), 1754-1797.
Finocchiaro, G., & Bomprezzi, C. (2020). A legal analysis of the use of blockchain technology for the formation of smart legal contracts. MEDIA LAWS, 2020(2), 111–135.
Ivanov, B. (2024). Stochastic modeling in production of oilseed crops in Bulgaria in the context of Green Deal. Bulgarian Journal of Agricultural Economics and Management, 69 (3).
Kumar, P., Kumar, R., Gupta, G. P., Tripathi, R.,Jolfaei, A., & Islam, A. N. (2023). A blockchain-orchestrated deep learning approach for secure data transmission in IoT-enabled healthcare system. Journal of Parallel and Distributed Computing, 172, 69–83. https://doi.org/10.1016/j.jpdc.2022.10.002
Lekha, H. P., & Bhavya, B. M. (2022). Smart contract based agricultural crop supply chain traceability. International Advanced Research Journal in Science, Engineering and Technology, 9(7), 124-130.
Libecap, G. D. (2014). Addressing global environmental externalities: Transaction costs considerations. Journal of Economic Literature, 52(2), 424-479. https://doi.org/10.1257/jel.52.2.424
López Rodríguez, C. M. (2015). Enforcing contracts and resolving disputes in contract farming: how ADR can address the specificities of agricultural production contracts. Uniform Law Review, 20(2-3), 180-200.
McMillan, J., & Woodruff, C. (1999). Interfirm relationships and informal credit in Vietnam. The Quarterly Journal of Economics, 114(4), 1285-1320. https://doi.org/10.1162/003355399556278
Mikova, R. (2021). Perspectives for Bulgarian agriculture and rural areas in the context of the CAP 2021–2027 and the EU recovery plan. Agricultural Academy, 1- 15. Retrieved from https://www.researchgate.net/publication/377187992_Perspectives_for_Bulgarian_agricul-ture_and_rural_areas_in_the_context_of_CAP_2021-2027_and_the_EU_recovery_plan
Minarelli, F., Raggi, M., & Viaggi, D. (2015). Asymmetric information along the food supply chain: A review of the literature. International Farming Systems Association Symposium. Retrieved from https://www.harper-adams.ac.uk/events/ifsa/papers/5/5.4%20Minrelli.pdf
North, D. C. (1991). Institutions. Journal of Economic Perspectives, 5(1), 97-112. https://doi.org/10.1257/jep.5.1.97
Paniagua, P., & Rayamajhee, V. (2024). On the nature and structure of externalities. Public choice, 201(3), 387-408. https://doi.org/10.1007/s11127-023-01098-1
Szabo, N. (1994). Smart Contracts. Retrieved from https://nakamotoinstitute.org/library/smart-contracts/
Tomar, M., Bhardwaj, R., Kumar, M., Singh, S. P.,Krishnan, V., Kansal, R., Verma, R., Yadav, V. K.,Dahuja, A., Ahlawat, S. P., Chand Rana, J., Satya- vathi, C. T., Praveen, S., & Sachdev, A. (2021). Development of NIR spectroscopy based prediction models for nutritional profiling of pearl millet (Pennisetum glaucum (L.)) R.Br: A chemometrics approach. LWT, 149, 111813. https://doi.org/10.1016/j.lwt.2021.111813
Williamson, O. E. (1981). The economics of organization: The transaction cost approach. American journal of so- ciology, 87(3), 548-577. https://doi.org/10.1086/227496
Yaga, D., Mell, P., Roby, N., & Scarfone, K. (2019). Blockchain Technology Overview. National Institute of Standards and Technology, NISTIR 8202.
Yuan, Y., & Sun, Y. (2024). Practices, Challenges, and Future of Digital Transformation in Smallholder Ag- riculture: Insights from a Literature Review. Agriculture; Basel, 14(12).
Zhang, C. (2024). Enhancing Agricultural Credit Guarantees in China’s Agricultural Value Chain Through Relationship Contracts: A Study on Risk Prevention Mechanisms. Journal of the Knowledge Economy, 1-20. https://doi.org/10.1007/s13132-024-02003-x
Binariks. (n.d.). Smart contracts in blockchain: Types, examples & best practices. Retrieved January 22, 2025, from https://binariks.com/blog/smart-contracts-blockchain-examples/
Downloads
Published
Issue
Section
License
Copyright (c) 2025 Bulgarian Journal of Agricultural Economics and Management
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
