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On the nature and magnitude of cost economies in hog production
Author(s) -
DuvaleixTréguer Sabine,
Gaigné Carl
Publication year - 2016
Publication title -
agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.29
H-Index - 82
eISSN - 1574-0862
pISSN - 0169-5150
DOI - 10.1111/agec.12245
Subject(s) - economies of scale , economics , marginal cost , production (economics) , unit cost , unit (ring theory) , factor price , scale (ratio) , function (biology) , returns to scale , production function , econometrics , technological change , technical change , quadratic equation , microeconomics , agricultural economics , macroeconomics , mathematics , productivity , physics , mathematics education , quantum mechanics , evolutionary biology , biology , geometry
In this article, we assess the impact of farm size on production cost and evaluate the marginal costs and margins by considering that input prices may change with the scale of production. By using French hog farm data, we estimate a system of equations including a feed price function, input demand functions, and an output supply function based on a technology approximated by a combined generalized Leontief‐Quadratic form. Our results suggest that the marginal costs are over‐estimated when the adjustment of the feed unit prices to a change in farm size is not controlled for. More specifically, the cost economies for large farms (enjoying the highest profits) arise primarily from lower feed prices, with technological scale economies having little impact. In contrast, farms with no hired labor exhibit technological scale economies and reach higher price‐cost margins compared to larger farms.