The Impact Of Cooperatives On Famers' Production Income And Scale Efficiency

Nowadays as the economy developing and market perfecting, agriculture production is changing from production oriented to market oriented, agriculture product transactions depend more and more on characteristics of products, transaction participators, and transaction as well, and governance structure is transferring from market exchange toward contracting and vertical integration. The improving production methods, increased concentration in the supply chain, lower world prices and more open markets to international competition are all threatening to small farmers.The product supply chain in China at present is diversified and undergoing transformation in both structure and management. It includes not only the traditional production-supply-marketing system constituting of small farm households, peddlers, processing enterprises, wholesalers, and retailers, but also new retailers such as farmer cooperatives, supermarkets, and specialized distribution centers. Therefore, is farmer cooperative, as a representative of small farmers, able to help farmers out and bring farmers economic benefits? That's the question we are going to answer in our research. Although there are abundant studies on this issue, most of answers to which being positive, there are still skeptical voices. Besides, most of existing studies are qualititive studies and case studies, whereas seldom is devoted to theoretical model derivation or mathematical model examination.This study examines the hypothesis that cooperatives have an influence on farmers' economic benefits by answering three questions. Firstly, what are the prices and payoffs farmers obtain in a market without cooperatives and a market with cooperative respectively? Secondly, are there different production profits between cooperative members and non-member farmers? Thirdly, do cooperative members and non-member farmers differ in scale efficiencies in production?There are some distinct characteristics in the study. (1) A theoretical model based on game theory is formulated to imitate and deduce enterprises'pricing decision and farmers' outlet choice in product marketing market. It is a creative and tentative research method applying to study farmer cooperatives in China. (2) The empirical study focuses on a specific product, i.e. pear in Zhejiang province, China. And classical mathematical models and econometric softwares are applied to examine the hypotheses. (3) The theoretical model comes to some conclusions with broad and general application, while the empirical analyses draw out some results which are of significantly practical meaning to specific area and industry.Main contents and results of the studies are:Chapterâ… is introduction. The research background, research objectives, and research questions are introduced, research technology roadmap and paper framework are formulated, and various research methods applied in the research are described. In addition, some innovation points and shortages of the research are concluded.Chapterâ…¡is dedicated to literature review. Some theories related to farmer cooperatives, agriculture production efficiency, and scale efficiency are covered and sorted out. The research points are formulated when awaring that there are shortages and vacuum in quantitive studies pertaining to the impact of cooperatives on farmers' production profits and efficiencies.Chapterâ…¢formulates a game model of farmers'choices for organizational forms in alternative market structures, i.e. pure IOF market, IOF-Coop mixed market, and pure cooperative market. According to the sub-game perfect equilibrium results, farmers gain a small profit in a pure IOF market; the presence of cooperatives in market increases farmers'payoffs; although farmers gain the largest payoffs in a pure cooperative market, the free riding problem in a pure cooperative market leads to unreasonable or inefficient resource distribution.Chapterâ…£introduces farmer cooperatives and pear industry development in Zhejiang province. Reasons for choosing pear industry in Zhejiang province as the population of emprical studies are explained. Then methods of sampling and data collection are elaborated. This chapter lays the foundation for emprical studies in the next two chapters.Chapterâ…¤is devoted to the emprical study on the influence of cooperatives on farmers' production profits. A statistical model is formulated to examine if cooperatives have an impact on members'capital cost, family labor cost, yield per mu, product price, income per mu, and net income per mu in pear production. The results show that members have higher capital cost, product price, pear production incomeper mu, and net income per mu than non-members do. However, there is no significant difference in family labor investment or yield per mu between members and non-members.Chapter VI examines the influence of cooperatives on members'scale efficiency. Borrowing the classical frontier production function and Cobb-Douglas production function, a stochastic frontier production function model is established. By grouping farmers into members and non-members, scale efficiencies, including production area scale efficiency, capital scale efficiency, and family labor scale efficiency, are calculated and compared between the two groups. The results indicate that (1) cooperatives enhance the general scale efficiency of members; (2) members have a significantly higher production area scale efficiency than non-members, whereas non-members have higher capital scale efficiency and family labor scale efficiency; (3) cooperatives help to increase members with small production area and large production aear, rather than members with middle production area.Finally, some conclutions, policy implications, and further researches in future are summed up in chapter VII.