Impacts of farmer cooperative membership on household income and inequality: Evidence from a household survey in China

While joining farmer cooperatives has been identified as a way for farmers, especially small farmers, to overcome their limitations in the marketplace and increase their income, this paper presents an analytical framework for examining how farmer cooperative may increase farmer income in rural China, empirically assesses the impacts of such membership on household income, and examines how the membership may affect income inequality. Data from a large-scale survey of rural households in China are used to examine the impacts of farmer cooperative membership and other factors on household income through a multivariate regression analysis and to test whether the impacts are different across income groups through a quantile regression analysis. The propensity score matching technique is used to address potential self-selection bias problems in the dataset and quantile regression is used to examine the impact for different income quantiles or groups of farmers. The empirical results indicate that farmers participating in professional cooperatives, on average, earned significantly higher income than their counterparts, but the positive impact was not statistically significant for low-income quantiles. This finding suggests that encouraging the development of and participation in farmer cooperatives could increase the average income but may not contribute directly to the policy goal of reducing income inequality in rural China.