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Scale Economies and Consolidation in Hog Slaughter

  • James M. MacDonald
  • Michael E. Ollinger

We use establishment based panel data to estimate a cost function which identifies the role of scale economies in hog slaughter consolidation. We find modest but extensive technological scale economies in the 1990s, and they became more important over time. But wages rose sharply with plant size through the 1970s, and those wage premiums generated a pecuniary scale diseconomy that largely offset the effects of technological scale economies. The size-wage relation disappeared in the 1980s; with growing technological scale economies and disappearing pecuniary diseconomies, large plants realized growing cost advantages over smaller plants, and production shifted to larger plants. Copyright 2000, Oxford University Press.

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File URL: http://hdl.handle.net/10.1111/0002-9092.00029
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Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 82 (2000)
Issue (Month): 2 ()
Pages: 334-346

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Handle: RePEc:oup:ajagec:v:82:y:2000:i:2:p:334-346
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  1. Marvin L. Hayenga, 1998. "Cost Structures of Pork Slaughter and Processing Firms: Behavioral and Performance Implications," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 20(2), pages 574-583.
  2. Allen, W Bruce & Liu, Dong, 1995. "Service Quality and Motor Carrier Costs: An Empirical Analysis," The Review of Economics and Statistics, MIT Press, vol. 77(3), pages 499-510, August.
  3. Gallant, A. Ronald & Jorgenson, Dale W., 1979. "Statistical inference for a system of simultaneous, non-linear, implicit equations in the context of instrumental variable estimation," Journal of Econometrics, Elsevier, vol. 11(2-3), pages 275-302.
  4. Hayenga, Marvin L., 1998. "Cost Structures of Pork Slaughter and Processing Firms: Behavioral and Performance Implications," Staff General Research Papers Archive 1254, Iowa State University, Department of Economics.
  5. Melton, Brian & Huffman, Wallace, 1995. "Beef and Pork Packing Costs and Input Demands: Effects of Unionization and Technology," Staff General Research Papers Archive 5043, Iowa State University, Department of Economics.
  6. Stevenson, Rodney, 1980. "Measuring Technological Bias," American Economic Review, American Economic Association, vol. 70(1), pages 162-73, March.
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