Estimating internal transaction costs: case of dairy corporate farms in Moscow oblast of Russia

Nikolay Svetlov

The paper presents a methodological framework for estimating internal transaction costs associated with adjusting input and output allocation. This framework is applied to estimate these costs of milk, other animal production and crop production on 89 dairy corporate farms located in Moscow oblast of Russia. The empirical model is a modified DEA linear programme. The estimator is a reduced cost of a constraint binding an output to its observed amount. Estimates are found to be very large, amounting to corresponding output price and even larger. Hence, cutting these costs must be a priority of regional agricultural policy.