Agricultural Production Cooperatives: Factors Affecting Performance

A key problem that hampers production within agricultural settlements is insufficient contribution of labor to the cooperative activity. This research analyzes the factors affecting members' labor supply. A theoretical model is developed based on expected utility maximizing behavior. Members are assumed to allocate labor between private and cooperative production. The model includes behavioral interaction of members, variation in income distribution rules and income uncertainty. The effect of a change in several cooperative parameters such as member cohesion, rules of income distribution, cooperative income variability, and income correlation is analyzed using comparative statics. The results indicate there are no simple, direct incentives to affect participation in an uncertain environment. Neither an increase in member cohesion nor an increase in the distribution of income based on participation will guarantee an increase cooperative labor. Similarly, cooperative participation will not necessarily decline with either an increase in cooperative income variability or an increase in cooperative and private income correlation. Labor supply was collected from members of an Israeli Kibbutz. Because there is no private production on this type of cooperative, the effects of income variability and correlation cannot be tested. It is possible, however, to isolate the effect of member cohesion. Tobit and Heckman estimation procedures were used to determine factors affecting members' supply of extra hours of labor. Member cohesion is found to be a significant factor in both procedures which confirms the importance of behavioral interaction in models of cooperative labor supply. Given the rules of income distribution on a Kibbutz, the non-pecuniary factors which affect a members' labor supply can also be tested. The statistical results appeal to our intuition because the decision whether or not to work over time is significantly influenced by attitudes but not by work activities, while the number of extra hours voluntarily worked is strongly influenced by work activities.