Acknowledgements

Economies of Scale Versus Participation: a Co-operative Dilemma?

Jones, D.C.; Kalmi, P.

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JEOD - Vol.1, Issue 1 (2012)

Year

Authors

Type of 

Cooperative

Data

Issues, 

Hypothesis(es)

Method

Findings & Comments

1996

Kebede 

and 

Schreiner 

Dairy marketing 

cooperatives in 

the Rift Valley of 

Kenya 

Convenience 

sample

1989-1990 

income 

statement, 

cross-sectional 

on 46 firms

Will the current 

trend of the 

privatization of 

firms in Kenya in its 

agricultural sector 

wipe out agricultural 

marketing firms, or 

will they be able to 

remain competitive 

and alive throughout 

this privatization?

Maximum 

likelihood 

technique used 

to estimate 

stochastic cost 

frontier function; 

can therefore 

determine 

technical efficiency 

& scale economies

Estimated long run average cost curve 

indicates scale economies; However, most 

of scale economies are exhausted for the 

average size of cooperatives in sample; scale 

elasticity significant at 10% level; 

Cooperatives are technically efficient for 

observed technology; can reduce unit 

costs by expanding volume of milk handled 

(existing members or adding members or 

merging) 

1996

Rezvanian, 

Mahdian, 

and 

Elyasiani 

Cooperative 

depository 

institutions in 

Massachusetts 

Random sample 

within MA banks

Detailed info on 

coop banks in 

MA, 1989-1991

Do cooperative 

banks exhibit 

economies of scale 

and economies 

of scope, both 

overall and within 

products?

Translog models 

for: 1) overall econ 

of scale; 2) prod-

spec econ of scale; 

3) overall econ of 

scope

4) prod-spec econ 

of scope

Previous literature reviewed find that scale 

economies are present for small depository 

institutions, but is unclear on large banks

Find that ALL cooperative banks exhibit 

economies of scale

Find all except smallest coop banks had 

positive scope economies, but none were 

statistically-significant

CBs should increase both scale + scope of 

operation

1992

Schroeder 

Farm supply 

and marketing 

cooperatives in 

the US

Random Sample

Financial 

records from 29 

cooperatives 

from 1979-1988

Trend of decline 

in marketing & 

farmer cooperatives 

(acquired, merged, 

consolidation, 

bankruptcy) likely 

explained by 

operating costs, cost 

economies.  Purpose 

is to estimate 

economies of scale 

& scope.

Bootstrapping 

regression 

technique for 

estimation of 

confidence 

intervals for scale, 

scope elasticity 

Strong support for firm-wide economies of 

scale; Find product-specific economies of 

scale for grain, petroleum, feed, fertilizer, and 

merchandise (but not chemical) sales; Find 

economies of scope for all six products;

Common problem with estimations of 

economies of scale and scope is the lack of 

knowledge about confidence in estimates, 

and standard confidence intervals unreliable 

because nonlinear cost functions

1990

Kolari and 

Zardkoohi 

Cooperative 

and savings 

banks in 

Finland

Convenience 

sample

1983-1984 year-

end data on 369 

coop banks, 255 

savings banks

What does the 

cost structure of 

thrift institutions in 

Finland look like?

Modified translog 

cost model, using 

advances and bills 

as outputs 

Results indicate cost curves for both savings 

& cooperative banks are L-shaped at plant 

level, U-shaped at firm level; 

Find diseconomies of scope in joint 

production of advances and bills

Implies natural monopoly conditions not 

present (Fin. thrift industry)

2010

Glass, 

Goddard, 

McKillop, 

Wilson

Japanese 

cooperative 

banks

Convenience 

sample from 

Bankscope, 

around 400 

observations 

of cooperative 

banks

Returns to scale 

and efficiency 

in Japanese 

cooperative banks

Modified translog 

cost model, 

correcting for 

the desirability of 

outputs

Japanese cooperative banks have increasing 

returns to scale; larger and more diversified 

cooperative banks are more efficient

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JEOD - Vol.1, Issue 1 (2012)

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