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What does Initial Farm Size Imply About Growth and Diversification?


  • Almuhanad Melhim
  • Erik J. O'Donoghue
  • C. Richard Shumway

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


Recent consolidation in agriculture has shifted production toward fewer but larger farms, reshaping business relationships between farmers, processors, input suppliers, and local communities. We analyze growth and diversification of U.S. corn, wheat, apple, and beef, farms by examining longitudinal changes in ten size cohorts through three successive censuses. We fail to reject Gibrat’s law in apple and wheat industries and the mean reversion hypothesis in beef and corn industries. Apple and wheat farms diversify over time. Findings suggest that scale economies diminish for large farms across all four industries and scope economies dominate scale economies for large apple and wheat farms.

Suggested Citation

  • Almuhanad Melhim & Erik J. O'Donoghue & C. Richard Shumway, 2008. "What does Initial Farm Size Imply About Growth and Diversification?," Working Papers 2008-5, School of Economic Sciences, Washington State University.
  • Handle: RePEc:wsu:wpaper:shumway-3

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    References listed on IDEAS

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    Cited by:

    1. Heath Henderson & Leonardo Corral & Eric Simning & Paul Winters, 2014. "Land Accumulation Dynamics in Developing Country Agriculture," IDB Publications (Working Papers) 6560, Inter-American Development Bank.
    2. Heath Henderson & Leonardo Corral & Eric Simning & Paul Winters, 2015. "Land Accumulation Dynamics in Developing Country Agriculture," Journal of Development Studies, Taylor & Francis Journals, vol. 51(6), pages 743-761, June.
    3. Höhler, Julia & Kuhl, Rainer, 2014. "Corporations in an evolving competitive environment - evidence for the German agribusiness," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182689, European Association of Agricultural Economists.
    4. Heath Henderson & Leonardo Corral & Eric Simning & Paul Winters, 2015. "Land Accumulation Dynamics in Developing Country Agriculture," Journal of Development Studies, Taylor & Francis Journals, vol. 51(6), pages 743-761, June.
    5. Hohler, Julia & Kuhl, Rainer, 2014. "Do Growth Rates Depend On The Initial Firm Size? Evidence For The German Agribusiness," 54th Annual Conference, Goettingen, Germany, September 17-19, 2014 187593, German Association of Agricultural Economists (GEWISOLA).

    More about this item


    firm growth; diversification; scale economies; scope economies; Gibrat’s law; longitudinal data;

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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