Can transaction cost economics explain the different contractual arrangements for the provision of agricultural machinery services?: a case study of Brazilian sSate of Rio Grande do Sul.

ABSTRACT - Agricultural mechanization represents an important phase in agricultural development. Unlike other modern inputs, mechanization typically involves considerable economies of scale, affecting its adoption. Experiences show that small farmers try to overcome this problem by engaging in a variety of contractual arrangements that allow sharing machinery services. Taking the case of Brazilian State of Rio Grande do Sul as an empirical example, the present paper explores the possibilities of transaction cost economics (TCE) to analyze the contractual arrangements concerning machinery services. The paper shows that the classical framework of TCE can be extended to account for peculiarities of transactions in this field. It is recommendable to take transaction costs into account together with other economic factors affecting the costs of providing machinery services