Environmental Engineering Reference
In-Depth Information
understand the incentives for dif erent stakeholders. They found that these
studies tend to be biased towards benei ts in general as opposed to costs like
transaction costs and ex ante studies for project preparation as opposed to
ex post monitoring and impact analysis. Cheung (1987) suggests that the
challenge to economists is to specify and identify what these transaction
costs are and how they will vary under dif ering circumstances.
Despite this, few empirical studies on transaction costs exist. For
example, Crocker (1971) conducted an empirical analysis of the role of
transaction costs in natural resource transfer using the case of the impact
of air pollution on agricultural land use. He concluded that transaction
costs for af ected farmland owners to bargain with polluters were very
high. Lel er and Rucker (1990) applied transaction costs analysis to the
structure of timber harvesting contracts and established empirical evidence
for the inl uence of specii c types of transaction costs on contractual pro-
visions. Kumm and Drake (1998) estimated the private transaction costs
incurred in relation to participation in the Swedish agri-environmental
programme, using data from a survey of 90 randomly selected farmers.
Transaction costs were dei ned to include expenditure for assistance from
agriculture or conservation consultants, mapping, communication costs
related to participation and time inputs (individuals' working hours). On
average, consultants' costs accounted for approximately one-third of the
total costs and the individuals' labour accounted for approximately two-
thirds. Transaction costs, as a share of actual compensation received, are
typically around 12 per cent and private transaction costs have risen over
recent years.
Drake et al. (1999) carried out a pan-European survey to determine
the cause of participation and non-participation of farmers in agri-
environmental programmes in eight EU member states. They outlined a
theoretical econometric participation function related to parameters like
the direct resource costs of conservation (in terms of reduced production
levels), the direct utility of the farmer derived from conservation activities,
and the transaction costs borne by farmers in relation to participation.
They found that transaction costs borne by farmers might pose constraints
on participation. Information-gathering, for example, on the economics
of organic conversion and how to change management practices, is often
a key component of the transaction costs incurred by farmers wishing to
participate in conservation schemes (Drake et al., 1999).
Aggarwal (2000) undertook a case study of group-owned wells in
southern India in an attempt to understand the possibilities and limita-
tions to cooperation in small groups by looking at the transaction costs
associated with these activities. He observed that start-up costs of well
construction in these villages included the costs associated with digging,
