Effort, Technology and the Efficiency of Agricultural Cooperatives

Abstract

The inefficiency of cooperative agriculture relative to private farms is often attributed to difficulties in monitoring or poor incentives. We develop a model to show that, in technologies with numerous sequential steps, even small shortfalls in worker effort can result in large output declines. Using data on cooperative and private farms in El Salvador, we find greater shortfalls in efficiency between cooperatives and private farms, as well as among cooperatives, for coffee, a crop requiring numerous steps in its cultivation, than for maize and sugar, which require fewer steps. Thus the undersupply of effort in cooperatives may be less than differences in productivity suggest, and cooperative agriculture is most likely to be successful where production does not involve many sequential steps.

A Review of the Empirical Literature on Farmer Cooperatives: Performance, Ownership and Governance, Finance, and Member Attitude

“…(), Ahn et al. () interpreted the difference in technical efficiency across the three outputs for the cooperatives as an indication of inferior effort exerted by free‐riding members. Second, Soboh et al.…”

Measuring the technical efficiency of cooperative societies in Kuwait

“…They noted that there is quite a range of observed inefficiencies among coops and that output is higher for both coops and private farms for less specialized crops and when many producers operate completely independently of one another-a condition that exists for Kuwaiti coops. The implications from studies such as Ahn et al (2012) and Ifenkwe (2007) is that we should also expect considerable variation in efficiency scores among the Kuwaiti coops in our data set.…”

“…Some recent research relating to the efficiency of cooperative societies in developing economies includes Uchenna and Olabisi (), and Kassali et al () for Nigeria, Tipi et al () for Turkey, Adebayo et al () for Rwanda, Baka () and Ochola () for Kenya, Papias and Ganesan () for India, Lakew et al () for Ethiopia, Huang et al () for China, Ahn et al () for El Salvador, and Cechin, Bijman, Pascucci, Zylbersztajn, and Octa () for Brazil. The literature suggests that coops facilitate economic development, and Adebayo et al () has reported that cooperative associations have also helped to reduce poverty in rural Rwanda.…”

“…Furthermore, cooperative societies may provide a range of benefits to their members that justifies their existence even in cases when they are less efficient than other types of firms. Adebayo et al (2010) for Rwanda, Baka (2013) andOchola (2016) for Kenya, Papias and Ganesan (2009) for India, Lakew et al (2014) for Ethiopia, Huang et al (2013) for China, Ahn et al (2012) for El Salvador, and Cechin, Bijman, Pascucci, Zylbersztajn, and Octa (2013) for Brazil. The literature suggests that coops facilitate economic development, and Adebayo et al (2010) has reported that cooperative associations have also helped to reduce poverty in rural Rwanda.…”

Governance of Production Co‐operatives in Russian Agriculture

“…This measuring difficulty gives rise to agency problems. If members are remunerated for number of working hours, they have an incentive to work long hours but not to work productively (Ahn et al, 2012). Individuals may also fear that efficiency raising measures might result in fewer working hours even though such measures would raise the economic performance of the collective of members.…”