Why do seaweed farmers join farmer organizations?

Abstract: This paper seeks to evaluate whether members of farmer organizations (FOs) receive higher seaweed prices than non-members. FOs have a good reputation among academics and policy makers for allowing farmers to achieve collectively what lies beyond the scope of the individual farmer, in some cases leading to higher prices. However, based on theory on quasi-credit contracts, cartels and adverse selection, this study predicts that cooperatives will not succeed in raising prices for seaweed farmers. This hypothesis is tested using data from a cross sectional survey of 91 seaweed farmers in Bali, finding no significant difference inmean prices for members and non-members. In fact, controlling for size, this study finds that members of FOs actually receive lower prices than nonmembers. Suggesting that farmers who earn lower prices are more likely to be attracted by membership in FOs. If this interpretation is correct, FOs play an important role in providing credit to the farmers who need it the most.