Transaction Costs and Farm-to-Market Linkages: Empirical Evidence from China Apple Producers

This article estimates the impact of transaction costs on smallholders’ market participation and integration, using the data collected in two apple production belts of China. Based on an innovative measurement of the transaction costs, and a disaggregated analysis on sales costs, information costs, negotiation costs and monitoring costs. The study shows that levels of the farmers’ market participation are mainly determined by the proportional transaction costs and price, while their market integration depends on the fixed transaction costs and price. This suggests that, in order to lower the transaction costs and enable specialization and market participation, it is necessary to invest and construct the farming infrastructure, update the rural information system, improve the structure of farmer households, and subsidize the cooperative organizations.