O-Ring Production on U.S. Hog Farms: Joint Choices of Farm Size, Technology, and Compensation
Abstract� We hypothesize that hog production can be characterized by complementarities between new technologies, worker skills and farms size.� Such production processes are consistent with Kremerâ€™s (1993) O-ring production theory in which a single mistake in any one of several complementary tasks in a firmâ€™s production process can lead to catastrophic failure of the productâ€™s value.� In hog production, mistakes that introduce disease or pathogens into the production facility can cause a total loss of the herd.� Consistent with predictions derived from the O-ring theory, we provide evidence that the most skilled workers concentrate in the largest and most technologically advanced farms and are paid more than comparable workers on smaller farms.� These findings suggest that worker skills, new technologies and farm size are complements in production.� The complementarities create returns to scale to large hog confinements, consistent with the dramatic increase in market share of very large farms over the past 20 years.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12992.
Date of creation: 28 Jan 2011
Date of revision:
Publication status: Forthcoming in Agricultural Economics
Contact details of provider:
Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
More information through EDIRC
complementarity; human capital; sorting; technology; farm size; Wages; hogs; O-ring; unobserved skill;
Find related papers by JEL classification:
- J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-10-07 (All new papers)
- NEP-BEC-2008-10-07 (Business Economics)
- NEP-HRM-2008-10-07 (Human Capital & Human Resource Management)
- NEP-LAB-2008-10-07 (Labour Economics)
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