Agricultural Markets in Transition: The challenge and application of New Institutional Economics

This paper examines market mapping within the context of transition countries (Ukraine and Tajikistan); principles of New Institutional Economics are applied to two different case studies.

Year of Publication2008

Efficient market access is seen as a fundamental need to enable people to make livelihoods. This paper examines the idea of market mapping within the context of transition countries who have failed to realise their promise in spite of their potential and tradition as strong agricultural producers. The application of the principles of New Institutional Economics (NIE) to two different case studies highlights the problems of getting goods to markets and directs attention to areas that should be addressed by governments and policy makers to make the markets work for those in rural areas. Agriculture in the post Soviet period has performed poorly and this is demonstrated by the two case study countries, Ukraine and Tajikistan. While these two states share a legacy of central planning they are very different in their resource base and therefore their agricultural potential. The methodology used is that of Rapid Market Appraisal which when applied with the NIE principles gives useful oinsight into the workings of the market in Transition countries. Market maps chart the flow of agricultural products from the producer to the consumer, evaluate the costs of exchanges and assesses the impact on market actors. The findings of this research indicate that the transaction costs of doing business at different stages of the chains are too high and prevent profitable, and in some cases, any exchange for mutual benefit of both parties. The absence of an efficient and trustworthy legal system, intermittent and unpredictable government intervention and corruption has contributed to this, compounded by the inadequacies of the basic infrastructure such as transport. The NIE model applied to transition countries suggests that the state has a key role to play in creating an enabling environment in which the economic actors can ‘play the game’ with well defined rules. This includes a fair and transparent system for contracts and contract enforcement, land tenure, quality standards and the provision of information, while resisting the temptation to intervene in the markets for political ends.

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Additional keywords/tags

market mappingnew institutional economicstajikistantransaction coststransitionukraine
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