Bridging the gap between smallholders and modern agriculture: Full insight into China's agricultural cooperatives

Smallholders are prevalent worldwide. Agricultural cooperatives are often considered an effective instrument for bridging the gap between smallholders and modern agriculture because they enable large-scale production and ensure the quality of agricultural products. This study aims to provide quantitative evidence on the role of cooperatives in boosting macro-level agricultural economic growth using unbalanced panel data of 1866 Chinese counties between 2007 and 2019. The results show that the number of cooperatives at the county level exerts an ‘inverted U-shaped’ effect on agricultural economic growth, while the average membership size of cooperatives has a ‘U-shaped’ effect on agricultural economic growth. Cooperatives with no farmer members or capital contribution can be considered ‘fake’ cooperatives. However, these ‘fake’ cooperatives do not hamper the agricultural economy. Furthermore, capital accumulation is a critical mechanism through which agricultural cooperatives bridge the gap between smallholders and modern agriculture. On the contrary, government subsidies to agricultural cooperatives do not contribute to agricultural development. Based on the findings, this study recommends to drive out ‘fake’ cooperatives without farmer members or accumulated capital to promote the development of ‘genuine’ cooperatives. Moreover, establishing an appropriate membership size and promoting capital accumulation are also important to enhance the effectiveness of agricultural cooperatives in developing modern agriculture.