The Impact of Agricultural Cooperatives on Efficiency and Productivity: Evidence from Olive-growing Farms in West Bank of Palestine

Abstract

Collective action by farmers including the development of cooperatives is regarded as one of solutions to overcome low productivity. This study investigates the impact of agricultural cooperative on technical efficiency (TE) and total factor productivity (TFP) of olive farms in the West Bank of Palestine. Using cross-section data of olive-growing farms in Jenin governorate, we estimated a stochastic frontier production function with inefficiency components. TFP was also estimated by residual approach. We employed propensity score matching to reduce self-selection bias in becoming a member of the cooperative. Results suggest that cooperative membership has a positive impact on TE and TFP, as joining a cooperative raises the TE by 10.16 to 10.52 percentage points. We interpret access to credits, land and productive olive seedlings, and extension services provided by cooperatives are possible pathways that affect TE and TFP. Due to the existence of huge inefficiency and low land productivity of olive farms in Jenin, we imply participation in cooperatives is an effective strategy for them to catch up with productive farms in the Mediterranean region.

Keywords

• agricultural cooperative;technical efficiency
• total factor productivity
• propensity score matching
• olive-growing farms
• west bank