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Weaknesses in Institutional Organization: Explaining the Dismal Performance of Kenya's Coffee Cooperatives

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  • Mude, Andrew G.

Abstract

In this paper, we use the experience of Kenya's failing Coffee Cooperatives to show that, under certain circumstances, membership based organizations can give rise to perverse incentives that undermine the benefits of organizing and lead to a reduction in member productivity and welfare. We identify certain features of the institutional environment underlying Kenya's coffee cooperatives that facilitate rent-seeking behavior. The lack of a formal regulatory structure with credible enforcement mechanisms, the presence of informal electoral practices conducive to vote-buying, and the legal support for local monopsonies that facilitates exploitive pricing all contribute to the dismal performance of Kenya's coffee cooperatives. Using a data set of more than 200 coffee farmers representing nine cooperatives, we find a statistically significant relationship between cooperatives empirically determined to be corrupt and high levels of technical inefficiency in coffee production among their members.

Suggested Citation

  • Mude, Andrew G., 2006. "Weaknesses in Institutional Organization: Explaining the Dismal Performance of Kenya's Coffee Cooperatives," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25306, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae06:25306
    DOI: 10.22004/ag.econ.25306
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    Cited by:

    1. Siwale, Agatha, 2018. "Can rural producer organisations transform rural production and trade? The case of Zambia's artisanal and small-scale mining associations," Resources Policy, Elsevier, vol. 59(C), pages 506-515.
    2. Kumar, Avinash & Kumra, Rajeev & Singh, Ramendra, 2022. "Base of the pyramid producers’ constraints: An integrated review and research agenda," Journal of Business Research, Elsevier, vol. 140(C), pages 115-129.
    3. Mujawamariya, Gaudiose & D’Haese, Marijke & Speelman, Stijn, 2013. "Exploring double side-selling in cooperatives, case study of four coffee cooperatives in Rwanda," Food Policy, Elsevier, vol. 39(C), pages 72-83.
    4. Aksoy, Ataman & Onal, Anil, 2011. "Consensus, institutions, and supply response : the political economy of agricultural reforms in Sub-Saharan Africa," Policy Research Working Paper Series 5782, The World Bank.
    5. Murray E. Fulton & Konstantinos Giannakas, 2020. "Corruption in agricultural processing firms: A comparison of cooperatives and investor‐owned firms," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 68(4), pages 445-460, December.
    6. Bekele Shiferaw & Gideon Obare & Geoffrey Muricho, 2008. "Rural market imperfections and the role of institutions in collective action to improve markets for the poor," Natural Resources Forum, Blackwell Publishing, vol. 32(1), pages 25-38, February.

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