Effects of cooperative membership on financial performance of banana farmers in China: A heterogeneous analysis

Abstract This paper estimates the heterogeneous effects of cooperative membership on smallholder farmers’ financial performance, measured by net returns, return on investment (ROI), and profit margin. We employ an innovative two‐stage predictor substitution model combined with an unconditional quantile regression model to address the endogeneity of the cooperative membership variable and analyze data collected from 626 banana farmers in China. Results, in general, show that cooperative membership improves banana farm financial performance. Particularly, we show that cooperative membership affects net returns and ROI positively and significantly across the selected unconditional quantiles, with the highest impact occurring at the highest 80th quantile. Cooperative membership also has a positive and significant impact on the profit margin for all quantiles (except for the 20th quantile), but the larger impacts occurring at the lower quantiles.