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A province-level analysis of economies of scale in Canadian food processing

Author

Listed:
  • Jean-Philippe Gervais

    (Department of Agricultural and Resource Economics, North Carolina State University, Campus Box 8109, 4336 Nelson Hall, Raleigh, NC 27695)

  • Olivier Bonroy

    (INRA-Pierre-Mendès-France University, BP 47, 38040 Grenoble Cedex 9, France)

  • Steve Couture

    (CRÉA, Laval University, 2425 Rue de l'Agriculture, Room 4412, Laval University, QC, Canada G1V 0A6)

Abstract

Cost functions of three Canadian food-processing sectors (meat, bakery, and dairy) are estimated using provincial data. A translog functional form is used, and the concavity property of the cost function is imposed locally. The Morishima substitution elasticities and scale elasticities are computed for different provinces. Inference is carried out using asymptotic theory as well as bootstrap methods. The evidence suggests that there are significant substitution possibilities between the agricultural input and other production factors in the meat and bakery sectors. Scale elasticities suggest that increasing returns to scale are present in the bakery and meat industries. To account for supply management in the dairy sector, separability between raw milk and other inputs was introduced. There exists evidence of increasing returns to scale at the industry level in the small producing provinces, but decreasing returns to scale in the two largest dairy provinces (Ontario and Quebec). [JEL Classification: D240, C300]. © 2008 Wiley Periodicals, Inc.

Suggested Citation

  • Jean-Philippe Gervais & Olivier Bonroy & Steve Couture, 2008. "A province-level analysis of economies of scale in Canadian food processing," Agribusiness, John Wiley & Sons, Ltd., vol. 24(4), pages 538-556.
    • Handle: RePEc:wly:agribz:v:24:y:2008:i:4:p:538-556
    DOI: 10.1002/agr.20178
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    2. Hepburn, Cameron & Teytelboym, Alexander & Cohen, Francois, 2018. "Is Natural Capital Really Substitutable?," INET Oxford Working Papers 2018-12, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
    3. Zheng, Yanan & Goddard, Ellen W. & Qiu, Feng, 2018. "Exploring the Effect of Disease Outbreaks on Farm Structure Change: A Dynamic Analysis for Canadian Pig Industry," 2018 Annual Meeting, August 5-7, Washington, D.C. 273801, Agricultural and Applied Economics Association.
    4. Chris Ross, 2011. "A Detailed Analysis of the Productivity Performance of the Canadian Food Manufacturing Subsector," CSLS Research Reports 2011-07, Centre for the Study of Living Standards.
    5. Bruno Larue, 2022. "On the economics of meat processing, livestock queuing, and worker safety," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 70(1), pages 63-72, March.

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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

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