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Agricultural Prices, Selection, and the Evolution of the Food Industry

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  • Carl Gaigné
  • Léo Le Mener

Abstract

We present a model that explains the relationship between low input prices, high exit rates, and industrial concentration. We argue that falling input prices force less productive firms to exit the market, and lead to the expansion of more efficient incumbents at the expense of less productive producers. Our model helps reconcile some well-established empirical results regarding the food processing industry. Indeed, agricultural prices fell between the early 1900s and 2006, and over the same period there was a trend towards higher concentration in the food industry, with an increase in average productivity.

Suggested Citation

  • Carl Gaigné & Léo Le Mener, 2014. "Agricultural Prices, Selection, and the Evolution of the Food Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(3), pages 884-902.
    • Handle: RePEc:oup:ajagec:v:96:y:2014:i:3:p:884-902.
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    File URL: http://hdl.handle.net/10.1093/ajae/aat080
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    Cited by:

    1. GAIGNE, Carl & LAROCHE DUPRAZ, Cathie & MATTHEWS, Alan, 2015. "Thirty years of European research on international trade in food and agricultural products," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 96(01), March.
    2. Agbekponou, Kossi-Messanh & Cheptea, Angela & Latouche, Karine, 2022. "Quality upgrading and position in global value chains," 2022: Transforming Global Value Chains, December 11-13, Clearwater Beach, FL 339411, International Agricultural Trade Research Consortium.
    3. Kossi Messanh Agbekponou & Angela Cheptea & Karine Latouche, 2023. "Quality upgrading and position in global value chains: Firm-level evidence from the French agri-food industry," Post-Print hal-04321554, HAL.
    4. Luca Macedoni, 2022. "Asymmetric information, quality, and regulations," Review of International Economics, Wiley Blackwell, vol. 30(4), pages 1180-1198, September.
    5. Hennessy, David A. & Zhang, Jing & Bai, Na, 2019. "Animal health inputs, endogenous risk, general infrastructure, technology adoption and industrialized animal agriculture," Food Policy, Elsevier, vol. 83(C), pages 355-362.
    6. Philipp J. H. Schröder & Allan Sørensen, 2021. "Specific taxation, asymmetric costs, and endogenous quality," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(5), pages 1022-1051, October.

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