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Economies of scale in dairy marketing cooperatives in Kenya

Author

Listed:
  • Ellene Kebede

    (School of Agriculture and Home Economics, Tuskegee University, Tuskegee, AL 36088)

  • Dean F. Schreiner

    (Department of Agricultural Economics, Oklahoma State University, Stillwater, OK 74074)

Abstract

This study estimates technical efficiency and scale economies for sample dairy marketing cooperatives in the Rift Valley of Kenya. The maximum likelihood technique was used to estimate a stochastic cost frontier function to determine technical efficiency and scale economies. The estimated long-run average cost curve indicates scale economies, but most of the scale economies are exhausted for the average size of the cooperatives in the sample. The test for scale elasticity was significant at the 10% probability level. Results indicate that cooperatives are technically efficient for the observed technology. Cooperatives can reduce unit costs by expanding volume of milk handled, either through existing members or new members, including merging with other cooperatives. © 1996 John Wiley & Sons, Inc.

Suggested Citation

  • Ellene Kebede & Dean F. Schreiner, 1996. "Economies of scale in dairy marketing cooperatives in Kenya," Agribusiness, John Wiley & Sons, Ltd., vol. 12(4), pages 395-402.
    • Handle: RePEc:wly:agribz:v:12:y:1996:i:4:p:395-402
    DOI: 10.1002/(SICI)1520-6297(199607/08)12:4<395::AID-AGR9>3.0.CO;2-U
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    References listed on IDEAS

    as
    1. Peter Helmberger & Sidney Hoos, 1962. "Cooperative Enterprise and Organization Theory," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 44(2), pages 275-290.
    2. French, Ben C., 1977. "The Analysis of Productive Efficiency in Agricultural Marketing: Models, Methods, and Progress," A Survey of Agricultural Economics Literature, Volume 1: Traditional Fields of Agricultural Economics 1940s to 1970s,, Agricultural and Applied Economics Association.
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    Cited by:

    1. Theodoros Skevas & Jasper Grashuis, 2020. "Technical efficiency and spatial spillovers: Evidence from grain marketing cooperatives in the US Midwest," Agribusiness, John Wiley & Sons, Ltd., vol. 36(1), pages 111-126, January.
    2. Derek C. Jones & Panu Kalmi, 2012. "Economies of Scale Versus Participation: a Co-operative Dilemma?," Journal of Entrepreneurial and Organizational Diversity, European Research Institute on Cooperative and Social Enterprises, vol. 1(1), pages 37-64, December.
    3. Pokharel, Krishna P & Featherstone, Allen M, 2016. "A Nonparametric Approach to Estimate Multiproduct and Product-specific Scale and Scope Economies for Agricultural Cooperatives," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236182, Agricultural and Applied Economics Association.

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