Agriculture Reference
In-Depth Information
Evidence from Zimbabwe is however mixed: using a sample of rural households from two
communal areas (Chiweshe and Gokwe), Piesse et al. (1999) found that non-farm income
sources have an equalizing effect in Chiweshe, whereas they deepen inequality in Gokwe.
These contradictory results are not surprising. As mentioned by Van de Berg and Kumbi
(2006), such contradictions are credited to differences in development of factor markets
and institutions and the biophysical environment which varies across regions. Conflicting
results were credited to differences in geographical location of the two areas and the main
activities carried out in each. Gokwe is located away from a major urban centre and has
comparative advantage in agriculture, while Chiweshe is located a few kilometres away
from Harare. These locational factors give Chiweshe a competitive advantage in non-farm
activities because of easy access to market for the outout and ready labour market.
Income equalising effect of various activities depends on the economic environment and
geographical location of the area under study. It does appear that there is some evidence
to suggest that in more remote areas, with traditional, mainly subsistence agriculture, the
agrarian power structures result in a situation where those who have better farm incomes
are also in a better position to exploit non-farm income opportunities. Conversely, where
there is a more developed infrastructure and urban proximity, the commercialisation of
agriculture may result in less equal farm incomes, but gives greater opportunities for non-
farm employment and thus more equalising non-farm income.
2.7 Institutional factors in agricultural marketing
In this section, the institutional factors, which influence smallholder farmers' decision
to market their produce, are reviewed. Institutional aspects in marketing and economic
development include transaction costs, market information flows and the institutional
environment. Smallholder farmers in less developed rural economies lack adequate market
information and contractual arrangements, lack lobbies in the legal environment and are
not easily receptive to changes (Delgado, 1999; Kherallah and Kirsten, 2001). These factors
tend to result in high transaction costs and, hence, difficulties in formal market participation.
According to Kherallah and Kirsten (2001), market institutions are the underlying
determinants of economic performance since they shape the organisation of market
transactions. Moreover, institutions provide for more certainty in human interaction. Ruijs
(2002) argues that institutions, which facilitate transactions, are necessary for sustainable
trade. Thus, the institutional development of a society has a substantial influence on
transaction costs. For instance, where trade laws (institution) are well implemented,
legally enforced agreements may result. Under such circumstances, traders can easily get
information on demand, market conditions and prices, leading to lower trade uncertainties
(Dorward and Kydd, 2005). Consequently, transaction costs will decrease considerably,
encouraging continuous transactions.
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