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Licensed Unlicensed Requires Authentication Published by De Gruyter December 3, 2013

The Cooperative Yardstick Revisited: Panel Evidence from the European Dairy Sectors

Markus Hanisch, Jens Rommel and Malte Müller

Abstract

Milk is an important agricultural product that has traditionally been processed by cooperatives. Across member states of the EU-27, however, large variation exists between the national market shares of cooperatives in dairy processing. Theoretical models suggest that a strong cooperative sector secures competitive regional prices for agricultural produce. Empirical studies which seek to quantify these effects are rare though. We use panel data to study the impact of cooperative strength – measured by market shares – on national farm gate milk prices in the EU-27 for the period from 2000 to 2010. Our results reveal a positive effect of cooperative market share on price that is relatively large and robust over different specifications of the econometric model. We conclude that dairy cooperatives have a pro-competitive effect and that exemptions for cooperatives from anti-trust regulation may be justified.

Acknowledgments

The research presented in this article is based on results from the project Support for Farmers’ Cooperatives which was financed by the European Union and managed by the European Commission, DG Agriculture, and Rural Development. The authors gratefully acknowledge financial support received under contract number 30-CE-0395921/00-42. We are thankful for helpful comments received from Jos Bijman, Silke Hüttel, Martin Odening, Krijn Poppe, and Perttu Pyykkönen on earlier drafts of the article. We would also like to thank an anonymous referee for helpful and constructive comments. The views expressed in this article are solely those of the authors. The usual disclaimer applies.

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  1. 1

    In the following, we use the terms “cooperative yardstick” or “cooperative yardstick effect” for referring to the set of theoretical contributions holding that cooperatives have a pro-competitive effect on prices in markets with imperfect competition. Most commonly, the terms “competitive yardstick”, “competitive yardstick effect”, or “competitive yardstick school of cooperative thought” are used in the literature (cf. Fousekis 2011; Sexton 1990; Staatz 1989; Cotterill 1984, 1987). Some authors (e.g. Fowler 1948) have also used the shorter “cooperative yardstick” when describing the phenomenon with regard to agricultural or consumer cooperatives.

  2. 2

    The variable was calculated the same way for all member states. Additional information on calculation of this variable at the level of member states is available in the Handbook for EU Agricultural Price Statistics (Eurostat 2008). Summary statistics on variation across states and years are available from the authors on request.

  3. 3

    One drawback of our approach is that these data were available only for 2010. We have thus implicitly assumed that the market share of cooperatives has been historically determined and stable over time.

  4. 4

    Within this project, a national report on agricultural cooperatives was written for each of the 27 member states by academic experts. As part of these reports, experts were asked to provide information on the market shares of major agricultural sectors, including dairy, for 2010. Through discussions within the project, it turned out that for two countries – Belgium and the United Kingdom – the country experts provided very low estimates. After checking these figures with respective national cooperative umbrella organizations, they were subsequently corrected.

Published Online: 2013-12-03

©2013 by Walter de Gruyter Berlin / Boston