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Diseconomies of Size with Fixed Managerial Ability

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  • Antonio Alvarez
  • Carlos Arias

Abstract

Managerial ability has important implications for farm growth. In this article we first show in a production model that increasing output with a fixed level of managerial ability can lead to a decrease in profits. Next, we discuss the effect that managerial ability has on economies of size. In the empirical part, economies of size are estimated for a sample of dairy farms using a proxy for managerial ability, which is calculated as a technical efficiency index. The results show that increasing farm size while holding managerial ability constant can be an important source of diseconomies of size. Copyright 2003, Oxford University Press.

Suggested Citation

  • 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.
    • Handle: RePEc:oup:ajagec:v:85:y:2003:i:1:p:134-142
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    File URL: http://hdl.handle.net/10.1111/1467-8276.00108
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