A Study On The Measurement Of Transaction Costs And Its Application In China

Transaction costs is a core concept of New Institutional Economics, it is also the fundamental difference between the New Institutional Economics and the Western mainstream neoclassical economics. Accurate measurement of the transaction costs has great theoretical and practical significance, but the relevant research has been imperfect so far. On the macro-level, North and Wallis (1986) estimated transaction costs of transaction sectors while ignoring the non-market transaction costs in economy. On the micro-level, the measurement of non-market transaction costs by foreign socholars is relatively wider, while it is a blank in China. Through the investigation and compration of time and money spent in seting up an enterprise, installing business phone, transfering of ownership of the assets to compare the transaction costs in different countries, the comparative static analysis widely used in micro-level NTC measurment is still has great limitations. Its accuracy depends on the range of data investigation and data availability, and it does not have strong explanatory power for a state economy. As a result, it is a challenge work to mesaure China's transation costs, which has a large number of non-market transaction costs.The article first proposes a theoretical framework for transaction costs measurement, then measure China's transaction sectors empirically with statistical accouting and SEM model methods. The main conclusions are as follows:Fistly, not only the size of transaction costs in transaction sectors but also its ratio relative to GDP has rised significantly since China's economy system transition. Johansen cointegration analysis also shows that there is weak cointegration relation between transaction costs from transaction sectors and economic development. The current level of transaction service in China is still low, and there is a large gap with developed countries. Meanwhile, transaction costs from the first and second industry only account for a small proportion of GDP and declined year by year, while transaction costs from the tertiary industry transaction sectors determining the overall changes of transaction costs. So it reveals that China's fast economic growth during 1978 to 2007 mainly depended on large resources inputs, and the service offered by production and covertion setor became worse. So accelerating the transaction services of the secondary industry sector is the key to improve China's transaction service.Besides, since reform and opening up, China's effective institutional transformation and infrastructure improvement have reduced the scale of NTC, but it was offset greatly by irrational government controls and the resulting negative effects which have been getting bigger and bigger. As a result, NTC relative to GDP tends to smooth. It can be said that Chinese reform and economic system transformation is successful, because Chinese NTC has dropped significantly. However, China's rapid economic growth has its own specific characteristics. Economic development has not brought about the reduction of NTC, and the total rent accompanied by GDP growth is huge, which mainly accounts for the increasing rich-poor division and high Gini coefficient in China. Therefore, controlling unnecessary waste to reduce NTC is the key to long-term sustainable development of China.