Empirical Economics

, Volume 48, Issue 1, pp 493–515 | Cite as

Transaction costs and social networks in productivity measurement

  • Geraldine Henningsen
  • Arne Henningsen
  • Christian H. C. A. Henning
Article

Abstract

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.

Keywords

Information networks Transaction costs Semiparametric estimation Nonparametric estimation Productivity analysis 

JEL Classification

D22 D23 D24 D85 L14 Q12 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2014

Authors and Affiliations

  • Geraldine Henningsen
    • 1
  • Arne Henningsen
    • 2
  • Christian H. C. A. Henning
    • 3
  1. 1.Department of Management EngineeringTechnical University of DenmarkRoskildeDenmark
  2. 2.Department of Food and Resource EconomicsUniversity of CopenhagenFrederiksberg CDenmark
  3. 3.Institute of Agricultural EconomicsChristian-Albrechts University KielKielGermany

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