Work

Big is efficient: Evidence from agricultural cooperatives in Ethiopia

Year: 2019

Type: article

Abstract: In Ethiopia, there is a renewed interest in agricultural cooperatives as an institutional tool to improve the welfare of smallholder farmers. One of the pathways through which cooperatives benefit their members is scale economies. However, the establishment of cooperatives in Ethiopia seems to pay little attention to the size of the organizations. This article aims at investigating the effect of size on cost efficiency of agricultural cooperatives. More specifically, the purpose is to examine whether a single cooperative can serve a given number of farmers at a lower cost than two or more smaller cooperatives could. We employ the concept of cost subadditivity to compare the cost efficiency of large versus small cooperatives, and by extension unilateral actions. We estimate a flexible production technology using cross‐sectional cooperative‐level data. Findings show that costs would drop by 78% to 181% if farmers join hands in relatively large rather than small cooperatives.

Source: Agricultural Economics

DOI: 10.1111/agec.12509

Authors: Tafesse W. Gezahegn, Steven Van Passel, Tekeste Berhanu, Marijke D'Haese, Miet Maertens

Institutions: Mekelle University, KU Leuven, University of Antwerp, Ghent University

Language: English

Topic: Cooperative Studies and Economics

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Zero hunger, No poverty, Decent work and economic growth

Open Access status: bronze

Funders: Vlaamse Interuniversitaire Raad, VLIRUOS