Third sector organizations in rural development: a transaction cost perspective

Vladislav Valentinov

EconStor Open Access Articles and Book Chapters, 2009, vol. 18, issue 1, 3-15

Abstract: In many parts of the world, rural development is supported by third sector organizations, such as nongovernmental organizations, farmer associations, and cooperatives. This essay develops a transaction cost explanation of these organizations role in rural areas. Since the traditional transaction cost theory is concerned with the choice of governance mechanisms within the for-profit sector, this essay adopts an alternative conceptualization of the notion of transaction cost by building on the theory of the division of labor. This theory regards transaction cost as a constraint on the division of labor causing the replacement of exchange with self-sufficiency. The proposed transaction cost explanation of rural third sector organizations consists of two arguments: 1) third sector organizations embody partial reliance on self-sufficiency; and 2) rural areas exhibit rurality-specific transaction cost acting as a constraint on the division of labor and thus creating a niche for third sector organizations. The essay concludes with suggesting a research program on developing an economic theory of the rural third sector.

Date: 2009
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:203054

DOI: 10.2137/145960609788066825

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