Structures for organization of transactions in Bulgarian agriculture

Abstract

In this paper we extend our previous efforts to incorporate achievements of the New Institutional and Transaction Cost Economics to the agrarian sphere. First, we demonstrate that Bulgarian agrarian economy is a Transaction cost economy, and clarify various types of transacting costs in transitional conditions. Next, we describe existing structures for governing of agrarian transactions, and evaluate their costs minimizing and incentive potential. Lastly, we estimate prospects for organizational modernization, and determine effective boundaries of market, private, public, and mixed modes for agrarian transacting. Neoclassical scenario for transformation of previous communist model ("free market plus private ownership") has not worked in Bulgarian agriculture. Transition has changed "rules of the game" but it has not made agrarian agents "more rational" and "less opportunistic". Consequently costs for new property rights and institutional development, and for market and private modes of individual transacting, have taken a good part of all social expenditures. High assets dependency, big uncertainty, low appropriability, and less frequency have determined a specific transitional structure of agrarian transacting. Less market transacting, big reliance on informal relationships at large scale, great extent of "over" integrated modes, part time farming and production cooperation phenomenon, block of all classes of transactions etc, all have come to existence. Besides, a large number of inefficient or contradictory third party (e.g. Government, Non-governmental organizations, international assistance etc) involvements in agrarian transacting have been in place. All this has deformed substantially emerging farming system, and domination of primitive and "gray" structures, little sustainability of large business and cooperative farms, significant distortion of national agrarian capital, and backward technological "development", have come to agenda. Low efficiency of public in-house organization and limited budget sources would restrict Government direct intervention in agrarian transactions. Agrarian policy should be toward exploring potential of market, private, and cooperative modes through new property rights provision, institutional and infrastructural support, improving law and contract enforcement, market information, extension education, assisting farmers association etc. Less expensive modes for trilateral governance (coordination, control on opportunism, incentives for specific investments) with active involvement of private sector and farmers organizations are to be preferred.