Agricultural cooperative membership and technical efficiency of apple farmers in China: An analysis accounting for selectivity bias

Abstract

This study examines the impact of agricultural cooperative membership on technical efficiency (TE) of apple farmers in China. We make novel contributions to the literature by employing a recently developed selectivity-corrected stochastic production frontier model with propensity score matching to address possible self-selection biases stemming from both observable and unobservable factors. The empirical results show that TE for cooperative members ranges from 79 to 86 per cent and that for non-members ranges from 74 to 84 per cent, depending on how biases are controlled. In addition, the efficiency levels of both members and non-members of cooperatives appear to be underestimated if the selectivity bias is not appropriately addressed. Our findings conclude that the average TE is consistently higher for cooperative members relative to their counterparts, highlighting the positive role of contemporary agricultural cooperatives in promoting efficient usage of production inputs.