Distributional effects of agricultural cooperatives in China: Exclusion of smallholders and potential gains on participation

This paper examines the treatment effects of the agricultural cooperative and publicly funded extension services on individual household economy, using data collected by the author from watermelon-producing farm households in rural Nanjing. The cooperative addressed in this study restricts the participation of small-scale farmers, implying that selection into the program must be taken into consideration for an accurate assessment of the treatment effect. The econometric analysis revealed that government extension services have a modest effect on farm income. In contrast, the treatment effect of the agricultural cooperative is robust and substantially large, accounting for nearly 70% of the pre-matching difference. This suggests that the agricultural cooperative system is an important avenue for farmers to improve their economic status. The treatment effect of the agricultural cooperative is highly heterogeneous; the economic benefits arising from the cooperative are significant only for small-scale farms. We can argue that a coexistence of smallholder exclusion and the treatment effect in favor of small-scale farms poses serious challenges to pro-poor agricultural growth in China.