The determinants and economic impacts of membership in coffee farmer cooperatives: recent evidence from rural Ethiopia

Abstract

Smallholder farmers in developing countries are often encouraged to get organized into cooperatives mainly to overcome production and marketing constraints that usually hinder the improvement of their livelihoods. However, impact evaluations regarding the contribution of cooperatives are limited; evaluation results are mixed and are not conclusive. The current study contributes to the literature by examining the determinants and economic impacts of cooperative membership using household survey data gathered from coffee farmers in the Jimma Zone of Oromia, Ethiopia. A propensity score matching (PSM) and endogenous switching regression (ESR) models are used to estimate treatment effects by controlling for selection biases. The results are augmented with qualitative data collected through group discussions made with randomly selected farmers in the study area. Findings indicate that the probability of farmers' membership decision increases with age, education level, family size, social networks, land property and accessibility to cooperatives. Both PSM and ESR models show that membership is positively associated with household income and assets. The ESR estimation results further confirm that members economically perform significantly better than if they had not been members and non-members would have even performed better than members if they had joined cooperatives. The results of group discussions also verify overall direct and spill-over effects, though cooperative services to members and non-members are undifferentiated. The results indicate a need for a mechanism to enhance the participation of poorer farm households, and to further improve member benefits as potential areas in making cooperatives more meaningful, attractive and sustainable.