Cultivation Arrangement by Practices, Transaction Cost and Farming Efficiency in Taiwan

We found that a farmer’s decision on the choice of self-plowed or hired-service can be regarded as a non-minimum cost behavior which depends upon both cost and non-cost concerns. Among those non-minimum concern variables, aging, education level, availability of machinery and the status of farming are found to be significant factors that determine farmers’ choice.

The inefficiency of farmer’s field-plowing arrangement can be decomposed into two components: wrong selection and non-minimum cost concerns. Empirical results indicate that 12% of inefficiency is due to farmer’s wrong selection and 88% of inefficiency is due to the non-minimum cost concerns.