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Scale Effects and Mark‐ups in the US Food and Fibre Industries: Capital Investment and Import Penetration Impacts
Author(s) -
Paul Catherine J. Morrison
Publication year - 1999
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.1477-9552.1999.tb00795.x
Subject(s) - economics , economies of scale , inverse demand function , investment (military) , food industry , industrial organization , labor cost , capital (architecture) , scale (ratio) , market power , monetary economics , microeconomics , demand curve , mechanical engineering , monopoly , physics , archaeology , quantum mechanics , politics , political science , law , history , engineering
Capital investment patterns and import penetration are often alleged to influence firms' costs and prices, and thus economic performance. We examine the impacts of these factors on measures of scale economies, input demand/composition, and market power in the US food and fibre industries. Flexible variable cost functions incorporating quasi‐fixity of three categories of private (internal) capital and two external technological and trade (import) factors represent the cost structures of the two industries. Pricing equations, based on inverse demand functions including import prices, represent output decisions. Cost and demand elasticities constructed from this model indicate reduced manufacturing costs from technical and trade, scale and capital effects. This increased cost efficiency arises largely from materials savings in the textiles industry and reduced labour use in the food industry. Mark‐up behaviour is exhibited for most of the sample period in the textiles industry, and neither industry appears heavily affected by import prices.