Transactions Costs Analysis of Agricultural Machinery Hiring Decision in Iraq

Abstract

The hire of some agricultural machinery and equipment services to complete a specific process within the farm considers of an alternatives to owning these machines. The prefer ability between hire or ownership a machine is one of the most important decisions taken by the farmer, which particularly effect on the net income, which is the scale of the farm profitability level. This decision is better in some cases to achieve a particular job quickly while reducing costs, due to the lease does not need a large capital such as possession of machinery. Besides that, the hiring decision can be considered as a transaction, while a transaction occurs when a service is transferred across a technologically separable interface. In order to proceed with a transaction, farmer must search for information and monitor the ongoing process to ensure a positive deal. The costs involved in such transaction-related services are called transaction costs. Thus, the resulting transaction costs should be considered.
The objective of this research is to investigate the role of transactions costs theory in determination the optimal decision for using the agricultural mechanization services. The theoretical framework is based on transaction cost economics which was adapted and interpreted in this paper to deal with agricultural mechanization services. Descriptive statistics, independent sample t-test and a binary logistic regression model were used to analyze the hiring decision by using cross- section farm survey data in rice production farms in Alnajaf province. Results indicate that some transactions cost attributes such as a specificity, uncertainty, frequency and measurability of the services concerned are important determinants of hiring decision. The results also show significant differences in hiring decision related to some characteristics such as farm income, the desire in use of agricultural mechanization, farm size, and education level.