Cost Efficiency Analysis of Agricultural Cooperatives using Frontier Analysis

Abstract

This research aims to measure and analyze the efficiency of Thai agricultural cooperatives during 2011- 2020 by applying an efficient frontier analysis technique. The Stochastic Frontier Analysis with 1,479 cooperatives that operated during the 10 years was used to construct a cost frontier. The translog cost function was employed to estimate parameters in the cost model. From estimated efficiencies, overall, the cost efficiency scores of agricultural cooperatives over the past 10 years have declined. Cooperatives in each region varied in their cost performance. The agricultural cooperatives in the southern territory had the highest average efficiency, whereas those in the eastern part had the lowest score. Regarding the sub-types of agricultural cooperatives, dairy cooperatives had the highest cost efficiency, whereas water users’ cooperatives in irrigated areas had the lowest value. The results showed that cooperatives with many members operated with higher cost efficiency than those with few members. The cooperative reserve fund appeared to be an important factor in generating cost efficiency. Thus, to promote agriculture cooperatives, understanding the differences in the cooperatives’ business environment, promoting participation in doing business with cooperatives, and cooperatives’ reserves allocation should be carried out for the sake of long-term cost efficiency.