Drivers of agricultural cooperative formation and farmers’ membership and patronage decisions in Ethiopia uri icon

abstract

  • Agricultural cooperatives are a prominent economic organization for farmers in agro-food systems. Industrial organization and new institutional economics theories explain the existence of agricultural cooperatives and farmers' participation in them through their ability to develop 'countervailing power' within markets and internalizing transaction costs, respectively. Using a unique dataset that includes community, cooperative, and household level survey data, this study empirically investigates the drivers of agricultural cooperatives formation and farmers' membership and patronage decisions in Ethiopia. The results indicate that agricultural cooperatives in Ethiopia tend to exist in locations that are connected to major roads with relatively well-developed market structures, supporting the industrial organization argument linked to market power for their formation more than the new institutionalists argument linked to overcoming potential contractual failures. A farm household's decision to join and use agricultural cooperatives, on the other hand, is strongly related to their location, scale of operation, specialization, and human and relational capital. A household's membership and patronage decisions are also affected by the size, specialization, and integration of the agricultural cooperative itself.

publication date

  • 2018
  • 2018