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Do the Largest Firms Grow and Diversify the Fastest? The Case of U.S. Dairies

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  • Almuhanad Melhim
  • Erik J. O'Donoghue
  • C. Richard Shumway

Abstract

We analyze growth and diversification of U.S. dairy farms by examining changes in ten size cohorts and new entrants through three successive censuses. We reject Gibrat's law and the mean reversion hypothesis of growth. Growth rates appear bimodal where the smallest and largest farm cohorts grow fastest. All cohorts diversify but the largest farms do not diversify as rapidly as medium-sized farms. New entrants are generally large, and they diversify more rapidly than comparably sized incumbents do. These data suggest that scale economies persist even for the largest cohort of U.S. dairy farms and scale economies dominate scope economies for large farms. Copyright 2009 Agricultural and Applied Economics Association

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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal Review of Agricultural Economics.

Volume (Year): 31 (2009)
Issue (Month): 2 (06)
Pages: 284-302

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Handle: RePEc:oup:revage:v:31:y:2009:i:2:p:284-302

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  1. Tauer, Loren W. & Mishra, Ashok K., 2006. "Can the small dairy farm remain competitive in US agriculture?," Food Policy, Elsevier, vol. 31(5), pages 458-468, October.
  2. Daniel A. Summer & Christopher A. Wolf, 2002. "Diversification, Vertical Integration, and the Regional Pattern of Dairy Farm Size," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 24(2), pages 442-457.
  3. Skolrud, Tristan D. & O'Donoghue, Erik J. & Shumway, C. Richard & Melhim, Almuhanad, 2007. "Farm Growth, Consolidation, and Diversification: Washington Dairy Industry," Choices, Agricultural and Applied Economics Association, vol. 22(2).
  4. Kostov, Philip & Patton, Myles & Moss, Joan E. & McErlean, Seamus, 2005. "Does Gibrat's Law Hold Amongst Dairy Farmers in Northern Ireland?," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24775, European Association of Agricultural Economists.
  5. P. A. Geroski, 2005. "Understanding the implications of empirical work on corporate growth rates," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 129-138.
  6. Antonio Alvarez & Carlos Arias, 2003. "Diseconomies of Size with Fixed Managerial Ability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(1), pages 134-142.
  7. Mosheim, Roberto & Lovell, C.A. Knox, 2006. "Economic Efficiency, Structure and Scale Economies in the U.S. Dairy Sector," 2006 Annual meeting, July 23-26, Long Beach, CA 21440, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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Cited by:
  1. Nehring, Richard F. & Sauer, Johannes & Gillespie, Jeffrey M. & Hallahan, Charles B., 2011. "Intensive versus Extensive Dairy Production Systems: Dairy States in the Eastern and Midwestern U.S. and Key Pasture Countries the E.U.: Determining the Competitive Edge," 2011 Annual Meeting, February 5-8, 2011, Corpus Christi, Texas 98824, Southern Agricultural Economics Association.
  2. Rajsic, Predrag, 2013. "Cost Structure of the Ontario Dairy Industry Revisited: Distributional Aspects," Working Papers 157407, Canadian Agricultural Trade Policy Research Network.
  3. Zimmermann, Andrea & Heckelei, Thomas, 2012. "Differences of farm structural change across European regions," Discussion Papers 162879, University of Bonn, Institute for Food and Resource Economics.

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