Organizing Small High Value-added Food Producers in China: Cooperation, Trust, and Rural Development

Western China is largely hilly or mountainous. The scope for mechanisation to increase agricultural productivity is limited. In addition, transportation costs are high because of the long distance to markets of agricultural products. Producing high value-added agricultural products is potentially an effective way to increase profit from agricultural production, reduce uncultivated land and protect the environment in these regions. Yet, the combination of small farm size, land fragmentation and high costs of certifying high value-added products implies farmers have to cooperate to produce and sell high value-added products. How well farmers can cooperate depends on many social and economic factors, in particular farmers? attitudes toward trust, public goods, reputation and norms towards deviations in cooperation. Few studies on agricultural production have taken these factors into consideration. We propose to study how these factors among small farm households determine their decision to jointly obtain certifications of high value-added products, maintain the quality of their products, and consequently affect the welfare of the farmers under different production systems. We will develop theoretical models incorporating attitudes and production decisions in a cooperation model. Econometric methods will be used to further explore the model predictions and provide evidence for policy advice. We will use both national representative data on agricultural households and collect our own data on high value-added food producers in Gansu and Yunnan provinces. The results will provide important lessons for future policies for high value-added food production in particular and for farmers cooperatives, land and agricultural production systems in general.