Cooperative, human capital and poverty: A theoretical framework

Abstract

In this article we investigate a simple theoretical model of cooperative organisations which are capable of enhancing its members’ human capital through efficient management of all their abilities. Thus, increased human capital has impact on the household’s wealth and consumption. Cooperatives can help alleviate poverty in developing countries. However, the model shows that cooperatives cannot increase the number of their members infinitely. They are constrained by managing capacity and the free-rider problem. Also, efficient cooperative is limited by its size.