A driver or a placebo? The role of financial support in farmer cooperative development in China

Purpose - This paper explores the effect of financial support on farmer cooperative development in the Chinese context, aiming to evaluate the effectiveness of public inputs and draw implications for the sustainable development of cooperatives. The variance of the effect in different sectors, i.e. crop, forestry, husbandry, fishery and services, is investigated. Design/methodology/approach - Provincial-level panel data from 2007 to 2017 are used for this study. A linear dynamic panel regression model is estimated using multiple estimation methods, i.e. the generalized method of moments (GMMs), fixed-effect model and ordinary least squares (OLS) are applied. Findings - The empirical analyses indicate that the role of the government is important for the development of farmer cooperatives but limited in some specific aspects. First, the coverage of financial support is positively associated with the growth of cooperative population and membership size, but the strength of financial support, measured by the total amount of financial support divided by local agricultural gross domestic product (GDP), has no statistically significant effects on the development of cooperatives. Second, financial support does not exhibit significant influence on the revenue of cooperatives. Third, the magnitude of the effect of government support on cooperative development is heterogeneous across different sectors. Originality/value - The research study adds to the institutional economics literature on the association between institutional environment and organization development by focusing on a particular and an important type of organization, i.e. farmer cooperatives. It is one of the attempts and a most extensive study to empirically investigate the role of financial support in the development of farmer cooperatives.