Got (Clean) Milk? Governance, Incentives, and Collective Action in Indian Dairy Cooperatives

Abstract

Much economic activity in developing countries takes place in groups whose members are associated through social networks. Group sales can connect small-scale producers to broader markets, but introduce opportunities for free-riding. We explore the effect of collective incentives on group production among rural Indian dairy cooperatives. In a randomized evaluation, we find village-level cooperatives can solve internal collective action problems to improve production quality. However, some village elites decline payments when they cannot control information dis- closure. Opting out reflects frictions in allocating surplus within a social network, and suggests some transparency-based efforts to limit elite capture may undermine policy goals.