DIVISION OF LABOR, TRANSACTION COSTS AND EFFICIENCY OF THE FAMILY FARM Rubens Nunes Universidade de São Paulo – USP (Campus de Pirassununga) Faculdade de Zootecnia e Engenharia de Alimentos – FZEA Av. Duque de Caxias Norte, 225 - C.P. 23 13635-000 Pirassununga – SP – Brasil rnunes@usp.br Abstract This paper analyses the economic rationality underlaying family farming. Family farm is understood as a specific organizational form. Choice of organizational form is due to relative efficience of alternative ways to conduce transactions, given transaction costs in inputs and outputs markets. First section defines “family farm” as a specific organizational form. The following one discusses the effect of transaction costs inside the farm, as the time specifity of tasks, on the choice of organizational form. Third section focuses on transaction costs in markets related with the family farm, such credit and labor markets. It is argued that the allocation of family labor inside and outside of the farm depends on costs of using labor market. In absence of transaction costs, the problem of family farm would be meaningless. A widespread and robust organization such as family farm must have a economic rationality. Some market imperfections and the trade off between growing labor division and transaction costs can be suitable microfoundations to explain the survival of family farming. Key words: family farm, transaction costs; division of labor.