Impact of cooperative membership on production efficiency of smallholder goat farmers in Nepal

Abstract

Goat is a source of cash income to smallholders in many developing countries. The productivity of goat farmers is poorly understood and assumed similar across all households. Cooperatives are hailed as an institution that can provide market power to smallholders in developing countries. We assess the impact of cooperatives on the technical efficiency of goat farmers in Nepal. Multistage sampling and in-person interviews were used to collect information from 334 nonmember and 327 member cooperative farmers from two prominent goat production districts in Nepal. We use translog production function to calculate the technical efficiency. The endogeneity associated with cooperative membership is addressed through an instrumental variable approach. The one-step analysis was used to avoid bias due to the one-sided stochastic frontier analysis error. All conventional inputs have significant and positive impact on performance. Cooperative membership shows positive and significant impact on technical efficiency. The average technical efficiency score of cooperative members was 93.2%, while of nonmembers was 90.7%, and the difference was significant. Variables positively affecting technical efficiency include number of family members in agriculture, education, and training on goat production. Cooperative membership encourages farmers to embark on commercial production, fodder tree planting, farm byproducts utilization and kitchen waste utilization.