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Using a recent rural farm household survey, the purpose of this paper is to investigate inclusiveness and effectiveness of agricultural cooperatives in Ethiopia.

The study employs a logit model to examine inclusiveness and an endogenous switching regression (ESR) model to evaluate the effectiveness of agricultural cooperatives.

The results show that agricultural cooperatives are less inclusive of land-poor and illiterate households. On the other hand, the estimated results indicate that cooperatives effectively improved agricultural performance and welfare of its member households – i.e. membership in cooperatives increases yield and income by 1.37 quintal/hectare and 1,804 birr, respectively. Moreover, the result shows that marketing cooperatives effectively increased marketed surplus of their members by 34 percent.

The study has important implications regarding the ways to improve the effectiveness and/or inclusiveness of agricultural cooperatives.

While accounting for the collective behavior of cooperatives, this study uses multiple outcome variables in examining the effectiveness of cooperatives in Ethiopia. Furthermore, this paper employs the ESR model and accounts for potential problems in estimating impact using non-experimental data.