THE PRODUCTIVE EFFICIENCY OF US MILK PROCESSING CO‐OPERATIVES

Abstract

While co‐operative organisations fare well in agricultural markets in the United States, this paper argues that co‐operatives are theoretically an inherently inferior form of organisation. Empirically, we apply a nonparametric frontier production model to a sample of co‐operative and non‐co‐operative US fluid‐milk processors to determine the relative productive efficiency of these two forms of organisation. Our empirical results support the hypothesis that US milk processing co‐operatives are less efficient than their proprietary counterparts.