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Testing for Vertical Economies of Scope: An Example from US Pig Production
Author(s) -
Azzam Azzeddine M.
Publication year - 1998
Publication title -
journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.157
H-Index - 61
eISSN - 1477-9552
pISSN - 0021-857X
DOI - 10.1111/j.1477-9552.1998.tb01282.x
Subject(s) - economies of scope , scope (computer science) , production (economics) , vertical integration , economics , empirical evidence , industrial organization , economies of scale , microeconomics , computer science , programming language , philosophy , epistemology
A firm operating in two or more stages of production is said to have vertical economies of scope if the costs of jointly producing two or more vertically adjacent products is less than the costs of producing the products independently. As important as those economies are in theory, they have so far received no empirical treatment compared to scope economies in multi‐output production, especially in agriculture. This paper tests for vertical economies of scope in US pig production, using 1990 firm‐level cost data. Based on the Wilcoxon matched‐pairs signed‐rank test, no evidence of vertical economies was found, meaning that it was no more or less costly to produce pork in a farrow‐to‐finish setting than with separate feeder‐pig production and finishing.