The Cooperative Yardstick Revisited: Panel Evidence from the European Dairy Sectors

Abstract

Milk is an important agricultural product that has traditionally been processed by cooperatives. Across member states of the EU-27, however, large variation exists between the national market shares of cooperatives in dairy processing. Theoretical models suggest that a strong cooperative sector secures competitive regional prices for agricultural produce. Empirical studies which seek to quantify these effects are rare though. We use panel data to study the impact of cooperative strength – measured by market shares – on national farm gate milk prices in the EU-27 for the period from 2000 to 2010. Our results reveal a positive effect of cooperative market share on price that is relatively large and robust over different specifications of the econometric model. We conclude that dairy cooperatives have a pro-competitive effect and that exemptions for cooperatives from anti-trust regulation may be justified.