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The economics of on‐farm processing: model development and an empirical analysis
Author(s) -
Ekman Sone,
Andersson Hans
Publication year - 1998
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/j.1574-0862.1998.tb00497.x
Subject(s) - diversification (marketing strategy) , economics , partial equilibrium , agriculture , industrial organization , competition (biology) , product (mathematics) , scale (ratio) , economies of scale , rural development , agricultural economics , microeconomics , business , marketing , general equilibrium theory , ecology , physics , geometry , mathematics , quantum mechanics , biology
Recent trends in the developments of the Common Agricultural Policy suggest an increasing attention towards rural development issues. On‐farm processing may offer an alternative for diversification, income generation and rural development in the event of increasingly deregulated agricultural markets. In this study, the economics of on‐farm processing for the case of the Swedish potato industry is examined. An interregional partial equilibrium model is developed. Various stages of the potato marketing chain are explicitly modelled. It is empirically demonstrated that, in some regions, on‐farm processing is a part of a socially optimal industry structure. Furthermore, it is shown that on‐farm processors are more robust towards import competition than bulk product producers. Hence, the results support the notion that small scale processing may contribute towards satisfying some of the objectives of an effective rural development agenda.