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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

    ()
    (School of Economic Sciences, Washington State University)

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. 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.

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File URL: http://faculty.ses.wsu.edu/WorkingPapers/Shumway/Dairy_2nd_rev_080608.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2008-7.

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Length: 33 pages
Date of creation: Jul 2008
Date of revision:
Handle: RePEc:wsu:wpaper:shumway-5

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Keywords: : census; dairy; diversification; growth; scale; scope;

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  1. Tauer, Loren W. & Mishra, Ashok K., 2003. "Can the Small Dairy Farm Remain Competitive in U.S. Agriculture?," Working Papers 127239, Cornell University, Department of Applied Economics and Management.
  2. 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.
  3. 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).
  4. Kostov, Philip & Patton, Myles & Moss, Joan & McErlean, Seamus, 2006. "Does Gibrat’s law hold amongst dairy farmers in Northern Ireland?," MPRA Paper 3370, University Library of Munich, Germany.
  5. 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).
  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. 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.
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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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