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Diseconomies of Size with Fixed Managerial Ability
Author(s) -
Alvarez Antonio,
Arias Carlos
Publication year - 2003
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/1467-8276.00108
Subject(s) - diseconomies of scale , proxy (statistics) , sample (material) , economics , constant (computer programming) , index (typography) , production (economics) , sample size determination , econometrics , microeconomics , industrial organization , statistics , mathematics , economies of scale , computer science , chemistry , chromatography , world wide web , programming language
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.