Ownership Type, Property Rights, and Relative Efficiency

Abstract

Proprietary firms and cooperatives compete in many agricultural markets, especially in the dairy, cotton, and grain and oilseeds markets. While both types of firms are privately owned, the rights of ownership differ considerably between the two. The most notable difference is in owners’ abilities to transfer ownership. The theoretical literature on property rights suggests that differences in the rights of ownership will have implications upon the efficiency with which a decision-making unit (DMU) operates. The effect of property rights on efficiency, however, is ultimately an empirical question. This chapter uses data envelopment analysis (DEA) to compare the levels of technical and scale efficiency for a sample of proprietary and cooperative fluid-milk processors in the U.S. to determine the effect of the attenuated rights of cooperative ownership upon productive efficiency.