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

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  • Gervais, J.P.
  • Bonroy, O.
  • Couture, S.

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 bakerysectors. Scale elasticities suggest that increasing returns to scale are present in 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).

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File URL: http://www.grenoble.inra.fr/Docs/pub/A2007/gael2007-19.pdf
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File URL: http://dx.doi.org/10.1007/s11149-008-9058-z
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Bibliographic Info

Paper provided by Grenoble Applied Economics Laboratory (GAEL) in its series Working Papers with number 200710.

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Date of creation: 2007
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Handle: RePEc:gbl:wpaper:200710

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Keywords: TRANSLOG COST FUNCTION; FOOD PROCESSING INDUSTRY; RETURNS TO SCALE; DOUBLE BOOTSTAP;

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  1. Diewert, W E, 1971. "An Application of the Shephard Duality Theorem: A Generalized Leontief Production Function," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 481-507, May-June.
  2. Steven Buccola & Fujii Yoko & Xia Yin, 2000. "Size and Productivity in the U.S. Milling and Baking Industries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 865-880.
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  6. Michael K. Wohlgenant, 2001. "Scale Economies and Consolidation in Hog Slaughter: Comment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 1082-1083.
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  15. Baldwin, John R. & Sabourin, David & West, Donald, 1999. "Advanced Technology in the Canadian Food Industry," Advanced Technology in the Canadian Food Industry, Statistics Canada, Economic Analysis, number stcb4e, December.
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  17. Ryan, David L. & Wales, Terence J., 2000. "Imposing local concavity in the translog and generalized Leontief cost functions," Economics Letters, Elsevier, vol. 67(3), pages 253-260, June.
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Cited by:
  1. 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.

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