The Efficiency Of Farmers' Professional Cooperatives

After the disintegration of people's commune system, famers regained the status of independent decision-maker and producer, which stimulated their enthusiasm of production and liberate the productive forces during a certain period of time. However, this mode of production gradually revealed many defects that limited the revenue growth of famers. The defects include:first, too weak to withstand natural and market risks; second, difficult to form operation scale, high transaction costs and lack of negotiating skills; third, low technological content of products, lower end of the industry chain and meager profit; fourth, absence of government supply and market supply of services needed in agricultural production and operation, thus, famers have to serve themselves.To solve these problems, as early as in1980s, agricultural cooperative organizations based on household contract responsibility system have been emerged in China's rural areas, with the characteristics of clear property rights, clear membership, voluntary association, autonomy and mutual benefit. As the promulgation and implementation of the'Law of People's Republic of China on Farmers' professional cooperatives', farmers' professional cooperatives obtained new legal status, legal protection and policy support. Subsequently, the cooperative has been developed rapidly. At the end of2010, China has had379100farmers' professional cooperatives with29million famers (households).15provinces (municipalities/autonomous regions) had over than10thousand cooperatives. The membership size and services of cooperative have also been improved. As the rapid development of the cooperative, correlation studies have gained lots attention of economic academia.The author participated in researches twice in2009and2011to visit farmers' professional cooperatives, and witnessed a vigorous development of the cooperatives in rural areas. To establish cooperative does indeed an effective way to increase farmers' income and drive the economic development of rural areas. However, in the researches, I also found some problems and phenomena:the development of cooperatives was uneven. The registered capital of cooperatives ranged from a few million to tens of millions Yuan. The membership size of cooperatives ranged from dozens of households to several hundred or over than one thousand households. The sponsors of cooperatives were different; they were ordinary farmers, leading enterprises, village cadres and big producer and seller. The natural resources, capital resources, human resources and social resources the cooperatives owned were not the same. Some cooperatives developed well, and both the membership size and the production scale increased. Some cooperatives collapsed rapidly after the rapid rise because of the resignation of members. Some small-scale cooperatives gained high recognition of their members, but some large-scale and rapid-develop cooperatives exposed many problems. All these problems and phenomena urged me to think and find the causes of the differences among cooperatives.I argue that the generation, survival, growth and demise of cooperative finally depend on its efficiency. The existing literature have lots of meaningful investigations and achievements on cooperative's production and organization efficiency, including cost-sharing, economies of scale, reducing transaction costs, enhancing farmers bargaining position, expanding market share, enhancing the ability of farmers to withstand natural and market risks, facilitating the application of new technologies and the development of new product, and as well as bringing sense of security and belonging to famers. All these researches are the basis of my continuous study of cooperative's efficiency. However, the study of the clear definition of cooperative's efficiency and its influencing factors needs more thorough analysis to improve and systematize the existing research. Basing on the summation and absorption of what the previous have done, I use the perspective of club theory that different from the previous'to analyze the nature, efficiency of cooperative and the influencing factors of the efficiency. Through this research, I hope to, first, apply new perspective to clarify the nature, efficiency and the causes leading to differences in efficiency, thus broad the research horizons of cooperative theoretically; second, employ the theoretical research results to guide practice to investigate how to improve the efficiency and promote the development of the cooperative. Therefore, the study of this paper has important theoretical and practical significance.The paper applies the research methods of normative analysis, survey research, statistical analysis and case study. The basic idea is as follows:first, theoretical analysis of the nature, efficiency and influence factors of cooperative's efficiency; second, statistical analysis and case studies of information and data gained from field research; third, basing on the analytical conclusions, promoting efficiency-improve policy recommendations. According to this train of thought, the paper is divided into six chapters.Chapter1is introduction, which introduces the subject's resource, main concepts, method and structure of the paper, innovation points and defects. Chapter2is the related literature review combing the development and vicissitude of the club theory abroad and domestic correlation studies of farmers' professional cooperatives. Chapters3-6are the main parts. Chapter3and chapter4are the logical starting points and theoretical bases of the paper. Chapter3defines the nature of farmers' professional cooperatives as a club supplying club goods to their members; and innovatively puts forward the efficiency of cooperative as the efficiency that cooperative provides services (club goods) to its members, which including three aspects:efficiency of results, process efficiency and efficiency of horizontal comparison. Chapter4is the theoretical analysis of factors that affect the efficiency of farmers' professional cooperatives, which mainly analyzes members'constitution, information status and exclusive cost. In detail, the influences of homogeneity members'constitution and heterogeneity members' constitution, symmetric information and asymmetric information (managers' information dominated and members'information dominated), low exclusion cost and high exclusion cost. Chapter5is the statistical analysis and case study of the first-hand information and data gained from field research of cooperatives to outline the features of efficiency, members' constitution, information status and exclusive cost, and analyze the influences of members' constitution, information status and exclusive cost to cooperative's efficiency. Chapter6puts forward the policy recommendations aiming at the features and influences of members'constitution, information status and exclusive cost to improve the efficiency of cooperative and promote its good development, including mobilizing scarce resources and protecting interests of the membership, attracting talents and members training, strengthen institutional constraints and enhancing cultural cohesion.The main innovation points of this paper are as follows:1. The paper provides new perspective and ideas for the study of cooperative by applying the perspective of club theory to analyze the efficiency of cooperative. The provision of services of cooperative to its members is essentially the problem of club goods provision, and belongs to the research areas of public economics. According to author's understanding, the current literature mainly focused on the interpretation of laws and policies, analyses of institutional economics and general economic theory; it is rare to apply perspective of public economics, especially the perspective of club theory to analyze cooperatives.2. Basing on the natures of cooperative and the services it supplies, the definition of cooperative's efficiency is defined as the efficiency the cooperative provides services (club goods) to its members, and it includes three aspects of connotations: first, from the efficiency of results, the cooperative can realize service provision using fewer available resources and maximize the input-output ratio; second, from process efficiency, the cooperative can save cost in all the aspects of service provision; third, from efficiency of horizontal comparison, the supply of cooperative is more efficient than the government supply and market supply. 3.The paper defies defines the mechanism that the cooperative provide services to its members as the voluntary supply mechanism with the autonomous characteristics of self-decision-making,self-funding and self-provision.It is composed of five components:demand expression mechanism,decision-making mechanisms,financing mechanisms,service provision,and incentive and restraint mechanism.The compare between cooperative voluntary supply mechanism and government supply mechanism shows that the former has the features of simple and effective demand expression mechanism, open and democracy decision-making mechanism,fair and effective financing mechanism,balanced and effective service provision,and direct and effective incentive and restraint mechanism,thus it is more efficient in the provision of services needed in famers' production and organization.4.The paper takes members' constitution,information status and exclusive cost as the influencing factors of cooperative's efficiency and analyzes their mechanism of action.Generally,homogeneity is thought to be premise of efficiency,but the prisoner's dilemma on demand expression,decision-making and financing may diminish the efficiency;heterogeneity leads to easier decision-making and financing,co-learning and complementary may promote the efficiency,although, it also causes efficiency loss. Under the condition of manager information dominant,the investment and patronization of managers can improve principal-agent problem effectively;under the condition of membership information dominant, strengthening supervision, increasing punishment, concluding parchasing contract in favor of members and instituting profit apportionment policy in favor of patronization can reduce opportunistic behavior of members.The cooperative can implement efficient pricing and exclusive way because of its low exclusive cost.5.Basing on the first-hand materials and data from field research of22cooperatives, the paper analyzes efficiency and influencing factors of efficiency via the methods of statistical analysis and case study, and finds that:the heterogeneity of cooperative is mainly caused by differences of resource endowments between core members and ordinary members, meanwhile, within the core members and within the ordinary members, there is high homogeneity; the differences of objective function between core members and ordinary members may lead to infringement of ordinary members'benefits, thus the cooperatives with high overall satisfaction and meeting needs and interests of members in decision-making and service supply are cooperatives in low heterogeneity; the status of demand expression and heterogeneity are positively correlated; under the condition of heterogeneity, members with scarce resources and members lack of relevant resources can complement each other, thus if efficiency improvement is larger than efficiency loss caused by heterogeneity, members with scarce resources should be encouraged to join cooperatives, that is to say, it is necessary to allow certain degree of heterogeneity.There is information asymmetry in cooperative, and the information status associates with cooperative's sponsor. It is difficult for members to supervise managers because of their limited information, and the principal-agent problem can be alleviated if the managers are also investor and dealer of cooperative. The supervision of managers to members is realized via both formal and informal system of constraints. Because of the informal system of constraints and small spillover of the services and goods supplied by cooperative, the exclusive cost of cooperatives is generally low, thus the cooperative can implement efficient pricing and exclusive way.