The effect of trust on farmers’ milk market participation in dairy cooperatives in West Shoa, Ethiopia

ABSTRACT While previous studies recognise the importance of trust in cooperatives, there are very few empirical studies on the role trust plays in market participation in dairy cooperatives. This paper investigates the effect of trust on farmers’ milk market participation using data from dairy cooperatives in Ethiopia. First, a principal component analysis was performed on the data set of trust indicators to construct a composite indicator for measuring farmers’ trust. Second, the Heckman two-step procedure was employed to investigate the effect of trust on milk market participation. The result from the Tobit model indicates that trust is an important factor influencing the intensity of milk marketing through the cooperatives. The following implications are worthy of consideration for improving farmers’ trust and thereby market participation: improving the competency of the management, communicating and sharing of information, and democratic election of the management.