A conceptual framework for measuring transaction costs in agri-environmental schemes: an application to the Dutch collective scheme

Figures & data

Table 1. Conceptualisation of transaction costs.

Level 1	Level 2: broad transaction cost types	Level 3: activities in AES that incur transaction costs	Level 4: examples of indicators of transaction costs
Contact	Information costs	Private: Learning about the programme, including information gathering from consultants, environmental and agricultural studies, and going to information meetings	Time spent discovering the payment for specific agri-environmental management practices prior to applying
		Public: Searching for participants Information gathering from farmers, environmental experts and citizens regarding needs, goals and solutions Developing educational materials together with other actors Organising information meetings	Total costs of travel, purchase of scientific data, literature, consultant fees or telephone bills Number of person years spent on research and co-writing in the last year Costs related to information materials and postage
	Decision-making costs	Private: Determining a strategy or conservation plan Trials of management practices Purchasing of equipment to enable application^a	Hours spent in meetings or alone designing/planning specific practices Total costs of acquiring equipment or ICT
		Public: Working with individual farmers on land use planning, including pre-selection of sites Meetings with stakeholders on land use planning	The labour cost for the time spent at the farm investigating the sites and talking to the farmer Hours spent preparing and attending stakeholder meetings
Contract	Application costs or negotiation costs	Private: Applying to the programme, including seeking for help with the application procedure Reviewing and signing the contract	Hours spent on collecting information to fill out the application forms (e.g. maps, soil test results, field traits), hours spent on filling out the application forms Hours spent understanding and signing the contract
		Public: Assessing the applications Designing and reviewing contracts	Office hours spent in reviewing applications, in communication with the applicants, on archiving Office hours spent designing and archiving the contracts
		Both public/private: Negotiation sessions Conflict resolution during the negotiation process
Control	Monitoring costs	Private: Completing monitoring tasks Reporting to the funding body/paying agency, including any practice changes Attending and/or organising meetings, trainings, collaborations, and field trips	Perceived administrative workload Costs of resources to carry out monitoring and reporting Computer costs Number of transaction costs days spent in programme related activities that recur yearly
		Public: Administrative work, including the notification to a higher governmental body (e.g. national or EU) Assessing monitoring reports	The percentage of working time spent per year
	Adaptation costs	Public: Developing and distributing updated information Processing payments to sellers, including making corrections	Time spent on knowledge development
		Private: Preparing and attending evaluation meetings Proposing changes to the contract terms to the buyer Changing the strategy/planning	Hours spent reading and responding to the evaluation report
	Enforcement costs	Public: Responding to sellers and adapting the contract Processing payments to sellers in case changes have been made (e.g. sanctions)
		Both public/private: Carrying out administrative checks and/or audits Imposing sanctions, completing other enforcement tasks Conflict resolution, including mediation, legal services, arbitrage, or seeking a private solution	Total costs of attorneys’ fees, payments to state agencies and court costs
	Termination costs	Private: Processing non-compliance costs (malus) Paying for contract termination	Total fees for prematurely ending the contract

Source: Coggan et al. (2015), Colby (1990), Falconer, Dupraz, and Whitby (2008), Hobbs (1997), Mack et al. (2019), McCann and Easter (1999), Rørstad, Vatn, and Kvakkestad (2007), McCann and Claassen (2016), Mettepenningen, Verspecht, and Van Huylenbroeck (2009), Mettepenningen, Beckmann, and Eggers (2011), Nilsson (2009), Peerlings and Polman (2008), Royer (2011), Weber (2014, 2015). ^aNote that resources or materials needed for producing for the AES (such as seeds or equipment for mechanical weed control) are not what is meant here. These are not part of transaction costs, but considered production costs.

Figure 1. The Netherlands and NFW’s working area. Source: Author’s representation.

The marked area is NFW’s working area.

Table 2. Overview contracted participants and budget.

Management area	2016	2019	2020	Share in 2020
Wet infrastructure	16	36	36	5%
Category Water	0	25	27	4%
Dry infrastructure	386	410	423	60%
Open grassland	160	187	199	29%
Open arable land	0	2	7	1%
Total contracts	562	660	692	100%
Total budget	€2,799,433	€3,860,999	€3,904,691

Source: provided by farmer collective NFW.

Table 3. Measuring private transaction costs hours.

Actor	Data collection	Estimation of transaction costs
Farmer collective NFW	Questionnaire and administration of years 2015, 2016, 2019, 2020 and 2021 was obtained	The collective’s administration contained budgets for bird management directors and labour hours for staff, divided in multiple categories. The data were divided among the transaction cost types as defined in the conceptual framework. The collective used different budget categories before 2016, which made it impossible to separate the overall transaction costs into sub-categories based on this source. In addition, in some instances total costs were registered instead of labour hours. These sums were converted to labour hours using an average wage rate, to derive the total transaction cost hours for 2015. Budgets for the bird management directors were converted to hours based on a €20 rate. These hours were then divided in half among the application and adaptation cost types, based on information from one director.
Bird management director	Questionnaire and administration of labour hours for 2020 was obtained	Interviewee was asked to estimate the percentage time spent, according to the broad transaction cost types. Annual transaction cost hours estimated by 40*16 volunteers *306 h = 200,736.
Farmers	Questionnaire	Because of the difficulty with estimating the percentage time spent, farmers were asked instead to estimate the total time they spend yearly on the meadow bird scheme and how this has changed. Annual transaction cost hours estimated by 692 farmers *40 h = 27,680.

Figure 2. Schematic view of the Dutch collective approach. Source: Own representation based on Terwan et al. (2016).

Figure 3. Timeline of management year. Source: Authors’ own representation.

Table 4. Distribution of NFW’s transaction cost hours.

	Administrative categories NFW	2015	2016		2020^a		2020 vs. 2016
1. Contact
Information costs	Communication	n.a.	497	5%	998	12%	101%
Decision-making costs	Coordination with regional/national partners (e.g. the province, RVO) Director hours	n.a.	2,205	24%	1,261	15%	−43%
Subtotal			2,702	29%	2,259	27%	−16%
2.  Contract
Application costs	Administration (of members, (pre)subscription management, contracting)	n.a.	1,341	15%	997	12%	−26%
Conflict solving costs		n.a.	–		–
Subtotal			1,341	15%	997	12%	−26%
3.  Control
Monitoring costs	Monitoring Habitat management (coordination with actors in the field, annual adjustment of management, processing reports) Budget bird management directors Finance (preparing payments, handling bills)	n.a.	2,728	30%	2,111	25%	−23%
Adaptation costs	Budget bird management directors Knowledge development; both internally and externally	n.a.	1,638	18%	1,916	23%	17%
Enforcement costs	Inspection committee (executing the checks) Inspection (instructing checks own inspection committee, processing checks by NVWA, including objections)	126	773	8%	1,191	14%	54%
Subtotal			5,139	56%	5,217	62%	2%
Total hours		3,657	9,182	100%	8,473	100%	−8%

Source: Data provided by the collective NFW. Note that the administrative data of the collective could not be fitted one-to-one in the framework because not all categories from the conceptual framework are present in the administration; and/or not all categories are broken down in sufficient detail; and/or numbers are missing for certain categories.

^aTo categorise labour hours across the broad transaction cost types, the year 2020 was compared to 2019 and 2021 to check for irregularities.

Table 5. Comparison hours study case NFW in 2020.

Total labour hours of private actors	Collective NFW	Farmer-members (n = 692)	Bird management directors and volunteers (n = 656)
236,889 h	8,473	27,680	200,736
(100 %)	(4%)	(12%)	(85%)

Source: calculated by authors. We extrapolated our findings to all farmer-members and volunteers in the collective scheme as executed by Noardlike Fryske Wâlden.

Coggan, A., M. Van Grieken, A. Boullier, and X. Jardi. 2015. “Private Transaction Costs of Participation in Water Quality Improvements Programs for Australia’s Great Barrier Reef: Extent, Causes and Policy Implications.” Australian Journal of Agricultural and Resource Economics 59 (4): 499–517. doi:10.1111/1467-8489.12077.

 Web of Science ®Google Scholar

Colby, B. G. 1990. “Transactions Costs and Efficiency in Western Water Allocation.” American Journal of Agricultural Economics 72 (5): 1184–1192. doi:10.2307/1242530.

 Web of Science ®Google Scholar

Falconer, K., P. Dupraz, and M. Whitby. 2008. “An Investigation of Policy Administrative Costs Using Panel Data for the English Environmentally Sensitive Areas.” Journal of Agricultural Economics 52 (1): 83–103. doi:10.1111/j.1477-9552.2001.tb00911.x.

 Google Scholar

Hobbs, J. E. 1997. “Measuring the Importance of Transaction Costs in Cattle Marketing.” American Journal of Agricultural Economics 79 (4): 1083–1095. doi:10.2307/1244266.

 Web of Science ®Google Scholar

Mack, G., A. Kohler, K. Heitkämper, and N. El-Benni. 2019. “Determinants of the Perceived Administrative Transaction Costs Caused by the Uptake of an Agri-Environmental Program.” Journal of Environmental Planning and Management 62 (10): 1802–1819. doi:10.1080/09640568.2018.1515311.

 Web of Science ®Google Scholar

McCann, L., and K. W. Easter. 1999. “Transaction Costs of Policies to Reduce Agricultural Phosphorous Pollution in the Minnesota River.” Land Economics 75 (3): 402–414. doi:10.2307/3147186.

 Web of Science ®Google Scholar

Rørstad, P. K., A. Vatn, and V. Kvakkestad. 2007. “Why Do Transaction Costs of Agricultural Policies Vary?” Agricultural Economics 36 (1): 1–11. doi:10.1111/j.1574-0862.2007.00172.x.

 Web of Science ®Google Scholar

McCann, L., and R. Claassen. 2016. “Farmer Transaction Costs of Participating in Federal Conservation Programs: Magnitudes and Determinants.” Land Economics 92 (2): 256–272. doi:10.3368/le.92.2.256.

 Web of Science ®Google Scholar

Mettepenningen, E., A. Verspecht, and G. Van Huylenbroeck. 2009. “Measuring Private Transaction Costs of European Agri-Environmental Schemes.” Journal of Environmental Planning and Management 52 (5): 649–667. doi:10.1080/09640560902958206.

 Web of Science ®Google Scholar

Mettepenningen, E., V. Beckmann, and J. Eggers. 2011. “Public Transaction Costs of Agri-Environmental Schemes and Their Determinants: Analysing Stakeholders’ Involvement and Perceptions.” Ecological Economics 70 (4): 641–650. doi:10.1016/j.ecolecon.2010.10.007.

 Web of Science ®Google Scholar

Nilsson, F. O. L. 2009. “Transaction Costs and Agri-Environmental Policy Measures.” Journal of Environmental Planning and Management 52 (6): 757–775. doi:10.1080/09640560903083723.

 Web of Science ®Google Scholar

Peerlings, J. H. M., and N. B. P. Polman. 2008. “Agri-Environmental Contracting of Dutch Dairy Farms: The Role of Manure Policies and the Occurrence of Lock-In.” European Review of Agricultural Economics 35 (2): 167–191. doi:10.1093/erae/jbn022.

 Web of Science ®Google Scholar

Royer, A. 2011. “Transaction Costs in Milk Marketing: A Comparison between Canada and Great Britain.” Agricultural Economics 42 (2): 171–182. doi:10.1111/j.1574-0862.2010.00506.x.

 Web of Science ®Google Scholar

Weber, A. 2014. “How Are Public Transaction Costs in Regional Agri-Environmental Schemes Delivery Influenced by EU Regulations?” Journal of Environmental Planning and Management 57 (6): 937–959. doi:10.1080/09640568.2013.776950.

 Web of Science ®Google Scholar

Weber, A. 2015. “Implementing EU Co-Financed Agri-Environmental Schemes: Effects on Administrative Transaction Costs in a Regional Grassland Extensification Scheme.” Land Use Policy 42: 183–193. doi:10.1016/j.landusepol.2014.07.019.

 Web of Science ®Google Scholar

Terwan, P., J. G. Deelen, A. Mulders, and E. Peeters. 2016. The Cooperative Approach under the New Dutch Agri-Environment-Climate Scheme. Background, Procedures and Legal and Institutional Implications. The Hague, Netherlands: Ministry of Economic Affairs. Accessed 2 August 2021. https://ec.europa.eu/enrd/sites/default/files/w12_collective-approach_nl.pdf.

 Google Scholar