Agroindustrialization through institutional innovation - Transaction costs, cooperatives and milk-market development in the east-African highlands

Some small-holders are able to generate reliable and substantial income flo ws through small-scale dairy production for the local market; fur others, a set of unique transaction costs hinders participation. Cooperative selling institutions are potential catalysts for mitigating these costs, stimulati ng entry into the market, and promoting growth in rural communities. Trends in cooperative organization in east-African daily are evaluated. Empirical work focuses on alternative techniques for effecting participation among a representative sample of peri-urban milk producers in the Ethiopian highla nds. The variables considered are a modern production practice (cross-bred cow use), a traditional production practice (indigenous-cow use), three int ellectual-capital-forming variables (experience, education, and extension), and the provision of infrastructure las measured by time to transport milk to market). A Tobit analysis of marketable surplus generates precise estim ates of non-participants' 'distances' to market and their reservation level s of the covariates - measures of the inputs necessary to sustain and enhan ce the market, policy implications focus on the availability of cross-bred stock and the level of marker infrastructure, both of which have marked eff ects on participation, the velocity of transactions in the local community and, inevitably, the: social returns to agroindustrialization. (C) 2000 Els evier Science B.V. All rights reserved. JEL classification: O32: C12; C35.