Efficiency of agricultural cooperative members in Indonesia

Abstract

The food supply's stability is dependent on agricultural productivity, which, in turn, depends on the efficient allocation of production factors. This research analyzes the efficiency levels of rice farmers and compares them between cooperative members and non-members. This study quantifies efficiency using the stochastic frontier analysis (SFA) method and compares the results using the propensity score matching (PSM) method, which addresses potential selectivity bias resulting from the decision to join a cooperative. The study utilizes cross-sectional data from the Badan Pusat Statistik (BPS) of the Republic of Indonesia, encompassing a sample size of 68,204 farmers. The analysis reveals that the majority of farmers operate within an efficiency range of 70-90 percent. Cooperative members exhibit higher efficiency levels than non-members, with a 2.1 percent increase during the wet season and a 3.1 percent increase during the dry season. Researchers employ an alternative method, coarsened exact matching (CEM), to ensure robustness, yielding results similar to the PSM model. This research provides evidence that cooperatives have the potential to significantly enhance agricultural efficiency. The findings underscore the importance of developing and supporting cooperatives to enhance the overall welfare of farmers.