Does cooperative membership stabilize farm income volatility? Evidence from the pig sector in China

Abstract

PurposeFarm income in the agricultural sector is susceptible to natural and market risks. A large body of literature has studied the effects of cooperative membership on household welfare, technical efficiency, productivity and production behavior, yet little has been known about the impact of cooperative membership on farm income volatility. This paper aims to fill this research gap by investigating the relationship between cooperative membership and farm income volatility of Chinese pig farmers and drawing policy implications.Design/methodology/approachThis paper examines the effect of cooperative membership on farm income volatility, using data from a two-round survey of pig farmers in China. The authors employ an endogenous switching regression model to address the selection bias issues associated with unobserved factors simultaneously affecting farmers' participation in agricultural cooperatives and income earning activities.FindingsUsing household panel from a two-round survey of 193 pig farmers in China, this analysis highlights two key findings: (1) agricultural cooperative membership has significant and positive effect on farm income stability and (2) the impact of cooperative membership on farm income stability varies with production scale.Originality/valueThis research makes two contributions to the literature. First, this study contributes to the scant literature exploring the relationship between agricultural cooperatives and farm income stability. Second, to the best of the authors' knowledge, this is the first study that explores such relationship in a livestock sector. The pig sector in China and around the developing world has been increasingly challenged by multifaceted risks (e.g. price fluctuations, epidemic diseases, environmental regulations), and understanding the role of agricultural cooperatives in farm income stability of pig farmers is of great practical and policy significance.