Perceptions toward transaction costs: Aspect of hiring the agricultural machinery services by rice farmers in Iraq

Abstract

The option of market or outsourcing for buying different agricultural services and access to them includes extra costs. These costs are called transaction costs, for instance search and information, negotiation and monitoring costs. With the purpose of ensue a transaction, farmers obligate seek information and observe the continuing procedure to certify a confident contract. Thus, the resulting transaction cost should be considered. This article reports investigations into the rice farmers’ perceptions toward different types of transaction costs in the hiring aspect of agricultural machinery services in Iraq. The theoretical framework was based on transaction costs concept. The data of study were collected by using farm survey in rice production farms in Alnajaf province, and about 391 respondents were interviewed. A five-point Likert scale from “strongly disagree” to “strongly agree” was used to measure the level of farmers’ perception towards transaction costs. A descriptive statistics and Mann-Whitney test were used to analyze the data collected. Results showed that more than half of farmers have a perception and understanding about three types of transaction costs. Around 60% of the farmers have awareness to ensure the acceptable agreement with the other party, and drawing up an appropriate contract, while around 63% of them agree that the monitoring costs are important element in the hiring decision making. Moreover, the results also indicated that some socio-economic factors such as education level, income and size of farm have a strong relationship with the rice farmers’ perception towards adopt hiring option. The findings can oblige various agricultural services providers to provide appropriate services and products in agricultural machinery aspect to ensure their confidence at hiring these services.