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A province‐level analysis of economies of scale in Canadian food processing
Author(s) -
Gervais JeanPhilippe,
Bonroy Olivier,
Couture Steve
Publication year - 2008
Publication title -
agribusiness
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.57
H-Index - 43
eISSN - 1520-6297
pISSN - 0742-4477
DOI - 10.1002/agr.20178
Subject(s) - returns to scale , economies of scale , scale (ratio) , economics , agricultural economics , production (economics) , econometrics , dairy industry , agriculture , food processing , agricultural science , substitution (logic) , inference , microeconomics , geography , food science , environmental science , computer science , chemistry , cartography , archaeology , artificial intelligence , programming language
Cost functions of three Canadian food‐processing sectors (meat, bakery, and dairy) are estimated using provincial data. A translog functional form is used, and the concavity property of the cost function is imposed locally. The Morishima substitution elasticities and scale elasticities are computed for different provinces. Inference is carried out using asymptotic theory as well as bootstrap methods. The evidence suggests that there are significant substitution possibilities between the agricultural input and other production factors in the meat and bakery sectors. Scale elasticities suggest that increasing returns to scale are present in the bakery and meat industries. To account for supply management in the dairy sector, separability between raw milk and other inputs was introduced. There exists evidence of increasing returns to scale at the industry level in the small producing provinces, but decreasing returns to scale in the two largest dairy provinces (Ontario and Quebec). [JEL Classification: D240, C300]. © 2008 Wiley Periodicals, Inc.