Journal article
Transaction costs and social networks in productivity measurement
Department of Management Engineering, Technical University of Denmark1
Systems Analysis, Department of Management Engineering, Technical University of Denmark2
DTU Climate Centre, Systems Analysis, Department of Management Engineering, Technical University of Denmark3
Energy Systems Analysis, Systems Analysis, Department of Management Engineering, Technical University of Denmark4
University of Copenhagen5
Christian Albrechts University of Kiel6
We argue that in the presence of transaction costs, observed productivity measures may in many cases understate the true productivity, as production data seldom distinguish between resources entering the production process and resources of a similar type that are sacrificed for transaction costs. Hence, both the absolute productivity measures and, more importantly, the productivity ranking will be distorted.
A major driver of transaction costs is poor access to information and contract enforcement assistance. Social networks often catalyse information exchange as well as generate trust and support. Hence, we use measures of a firm’s access to social networks as a proxy for the transaction costs the firm faces.
We develop a microeconomic production model that takes into account transaction costs and networks. Using a data set of 384 Polish farms, we empirically estimate this model and compare different parametric, semiparametric, and nonparametric model specifications. Our results generally support our hypothesis.
Especially, large trading networks and dense household networks have a positive influence on a farm’s productivity. Furthermore, our results indicate that transaction costs have a measurable impact on the productivity ranking of the farms.
Language: | English |
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Publisher: | Springer Berlin Heidelberg |
Year: | 2015 |
Pages: | 493-515 |
Journal subtitle: | Journal of the Institute for Advanced Studies, Vienna, Austria |
ISSN: | 14358921 and 03777332 |
Types: | Journal article |
DOI: | 10.1007/s00181-014-0882-y |
ORCIDs: | 0000-0002-6720-0264 and Henningsen, Geraldine |