The Role of Cooperative Society in Economic Growth of Ethiopia

Abstract

This paper examines the relationship between economic contribution of cooperative society and economic growth in Ethiopian economies (across four regional states and one city administration) over 2015-2019 periods. The paper has used various empirical evidence and studies shows that cooperative societies have a greater role in economic growth across developing countries and specifically Ethiopia over time. However, the contribution of cooperative in terms of empowering community, grouping, promoting saving habit, provision of finance as loan, export and provision and distribution of fertilizer in economic growth has not been well analyzed and described across the study area by using g panel data analysis. In this paper the study has employed and estimating the economic contribution of cooperative on economic growth that consists of cooperative societies in the study area by using dynamic econometric techniques (General Moment Method panel model. Dynamic panel data result expressly Difference General Moment Method establishes a short run positive relationship between economic contribution of cooperative society indicators and economic growth. The researcher finds positive and all indicators are statistically significant impact of cooperative size, cooperative members, loan, export and provision and distribution of fertilizer on economic growth of the country under column 1. Furthermore, the study also considers under column 2 and 3(table 4.1), following handling of collapse the number of instruments and choosing separate instrument results, there is positive and significant contribution of saving, loan, capital, export and provision and distribution of fertilizer on economic growth of the study area. However, the number of cooperative sizes and its members are significant and negatively related to real per capita Gross Domestic Product with statistically significant at 1%, 5% and 10% level. Therefore, difference General Moment Method under column 3 is appropriate dynamic panel estimation methods. The result suggests a clear role of cooperative in boosting economic growth in particular, the spillover effects from cooperative development contributions. This study applied diagnostic test underneath dynamic panel estimation particularly Difference General Moment Method by Arellano-Bond test for first-order and second-order serial correlation and Sargan test and confirm that dynamic model is appropriate, which confirms the validity of the model. The result suggests the economic contribution of cooperative society indicators in saving, loan export, creating capital and provision and distribution of fertilizer in a driver of economic growth achievement goal and will advisable to conduct further research through adding other entities and considering long run aspects.