Abstract:
This study investigates the effect of transaction cost on participation of smallholder farmers in
vegetable market and on market channel choice decisions. The empirical analysis was based on
primary data collected from 250 sample farm households located in the Central Rift Valley of
Ethiopia in 2017. The double hurdle model estimation results show that age, total land size, and
distance from asphalt road negatively influenced farmers decision to participate in vegetable
marketing. However, quality of road connecting household residence to market, credit, TV
ownership, and membership to cooperatives positively and significantly affected quantity of
vegetables household' sold i.e. intensity of participation in vegetable market. Probit analysis on
the discrete choice between selling at the market versus selling at farmgate showed that
producers who had difficulty in accessing price information were more likely to sell their
vegetable at the farmgate. But, producers who were aware of prevailing prices in alternative
markets sell their product in retail market. Increase of knowledge of price in the alternative
market by farmers increase probability of selling vegetable in market retail channel by
approximately 21.9 %. Tobit regression of the effect of transaction cost on household vegetable
sells through broker show that quality of road, ownership of bicycle and vegetable type are
among key determinants of farmers' vegetable sell through brokers. In nutshell, the study found
that transaction costs in different forms influence smallholder farmers’ decisions to participate
on vegetable market, the intensity of participation, market channel choices and farmers’ use of
broker to sell vegetable in the Central Rift Valley of Ethiopia. Intervention geared to
minimization of transaction costs such supporting farmer organization may facilitate
information exchange and increase bargaining power of smallholder farmers
