O-Ring Production on U.S. Hog Farms: Joint Choices of Farm Size, Technology, and Compensation
� 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.
|Date of creation:||28 Jan 2011|
|Date of revision:|
|Publication status:||Published in Agricultural Economics, July 2014, vol. 45 no. 4, pp. 431-442|
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