What sets cooperative farmers apart from non-cooperative farmers? A transaction cost economics analysis of coffee farmers in Mexico

Carlos Omar Trejo‐Pech · Roselia Servín Juárez · Alvaro Reyes

31 citations0/0 files storedAgricultural and Food Economics

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Cooperative Studies and Economics Agricultural economics and policies Agricultural Innovations and Practices

Abstract

Abstract This study investigates what factors relate to the coffee farmer’s cooperative affiliation decision and whether this decision impacts the farmer’s cash holdings. First, we propose a cooperative affiliation model based on transaction cost economics theory. There is a lack of consensus in the literature on what factors explain the farmer’s cooperative affiliation decision in the coffee sector. Overall, we find that the more specialized coffee farmers are, the more likely they will become cooperative affiliates. This is consistent with transaction cost economics predicting that cooperatives are business structures that can reduce transaction costs and safeguard specialized assets from opportunistic behavior. Specifically, logit regression models suggest that shade-grown coffee plantations, off-farm income, coffee farming experience, low-level market competition, farmland size, altitude, and private farmland are statistically related to the farmer’s decision to affiliate with cooperatives. Results on farmland size and shade-grown coffee plantations can be particularly relevant for scholars, policymakers, cooperative leaders, and extension professionals in the region. Second, based on the affiliation model, we employ propensity score matching to evaluate the impact of the farmer’s cooperative affiliation decision on cash holdings, particularly on cash shortness. It is often claimed that farmers do not affiliate with cooperatives because these organizations cannot pay them in full at harvest and coffee collection time. It is believed that cooperatives’ inability to pay farmers early increases the likelihood of farmers’ cash shortness and their need for additional financing to operate or cover household needs. However, this study finds no evidence that the affiliation decision is related to the likelihood of the farmer experiencing cash shortness around harvesting and selling time.

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References

2005Confronting the Coffee Crisis: Can Fair Trade, Organic, and Specialty Coffees Reduce Small-Scale Farmer Vulnerability in Northern Nicaragua?2008Transaction Cost Economics: An Assessment of Empirical Research in the Social Sciences 2008Reaching the rural poor through rural producer organizations? A study of agricultural marketing cooperatives in Ethiopia 2017The determinants and economic impacts of membership in coffee farmer cooperatives: recent evidence from rural Ethiopia 2012Distributional effects of agricultural cooperatives in China: Exclusion of smallholders and potential gains on participation 2007Do farmers benefit from participating in specialty markets and cooperatives? The case of coffee marketing in Costa Rica1 2017Is voluntary certification of tropical agricultural commodities achieving sustainability goals for small-scale producers? A review of the evidence 2018A REVIEW OF THE EMPIRICAL LITERATURE ON FARMER COOPERATIVES: PERFORMANCE, OWNERSHIP AND GOVERNANCE, FINANCE, AND MEMBER ATTITUDE

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