62 CHAPTER 5


in its marketing activities. Additional members will increase the coordination costs (through an increase in size) without contributing to increased com- mercialization benefits (through added output to be marketed). As a conse- quence, some households that are uninterested in the additional service and only marginally interested in the commercialization services will revise their cost–benefit comparisons and leave the organization, further lowering com- mercialization benefits for the remaining members. This in turn may prompt additional departures from the cooperative. In the extreme case, the mar- keting cooperative will end up providing only noncommercialization services to its members. Only if there is substantial overlap between the two groups of members (those interested in commercialization and those attracted by the additional services)—in other words, if many households are likely to be interested in both services—can these supplementary activities reinforce the organization by providing more than one service at essentially constant costs. We test these relationships below.


Activities and Membership


Table 5.3 reports estimates of the correlation between various social activi- ties and the size of cooperatives (columns (1) and (2)), and with the potential aggregated product as measured by the total land available among coopera- tive members.4 Presumably, the introduction of these activities should lead to an increase in membership. However, if poorer households may be more interested in such social services, it follows that the overall product aggre- gation should only slightly increase as a result of the introduction of these activities.


In columns (1) and (3) we test for the effective significant influence of these activities on the size and product aggregation of the organization. The results indicate that consumption-related services as well as literacy training exert a strong positive influence on the size of the organization. The effect is somewhat weaker for product aggregation. Columns (2) and (4) assess the robustness of these results by adding a series of additional explana- tory variables. In particular, we use the initial size of the organization as a proxy measure for members mostly interested in the marketing services of the organization. (Thus we assume that social activities were added later to the cooperatives, which is the case for nearly all of them.) The results on social activities are robust across all estimations as well as the coefficients obtained on the initial membership variable. In contrast, the effect of social activities on product aggregation vanishes once the impact of initial product


4 See Chapter 3 for a discussion of the exogeneity of land allocation in Ethiopia.


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