Non-economic societal impact or economic revenue? A performance and efficiency analysis of farmer cooperatives in China

Abstract

The objective of this paper is to present an economic framework and empirical analysis of how non-economic output and social value-relevant variables affect the efficiency of farmer cooperatives. A multi-output translog production function considering non-economic societal output, represented by the number of beneficiary farmers, was estimated using survey data from 164 farmer cooperatives in Fujian province in China. The average technical efficiency of farmer cooperatives was estimated to be 0.747, implying that technical efficiency could be increased by 25.30% on average without additional resources given the current production status. The cooperatives’ efficiency and their ranking differed significantly with and without taking societal output into account, which indicates that non-economic societal output should not be ignored when evaluating their performance. The societal value-relevant variables for technical inefficiency factors represented by the extent of the provision of member services were found to have a negative impact on technical efficiency. These findings indicate that the non-economic social contribution made by farmer cooperatives should be included when evaluating their performance. • The first research incorporating societal output in performance measurement using cooperative production function. • Incorporating the societal value relevant variables does affect the technical efficiency. • The average technical efficiency of farmer cooperatives was estimated to be 0.747 • The extent of the provision of member services were found to have a negative impact on technical efficiency.