The commercial growth of farmer cooperatives in Romania: A double-hurdle model analysis

Abstract

In many countries, farmer cooperatives have been successful at facilitating access to markets in conditions of imperfect competition for a long time. However, modern farmer cooperatives have only been operational in Romania since 2005, and their development is slowed by several internal and external conditions. In the absence of empirical evidence of possible explanations for alleged shortcomings in the growth of farmer cooperatives in Romania, applied research is necessary to inform recommendations for practitioners, policymakers, and other stakeholders. Using financial data from 1,426 farmer cooperatives in Romania for the 2017–21 period, we estimate a double hurdle panel model of the probability and the intensity commercial activity with annual revenue as the variable of interest. All else equal, annual revenue increased in 2020 and 2021 relative to 2017, which to some extent refutes observations of underdevelopment. Although the membership size of farmer cooperatives in Romania is relatively small, its relationship to the probability and the intensity of commercial activity is positive. The relationship of age to the probability and the intensity of commercial activity is ∩-shaped, which may imply a relatively short lifespan for farmer cooperatives in Romania. Possible explanations are member opportunism and double taxation misunderstandings, but further research is necessary to generate more insights.