Economies of Size and Scale in Agriculture: An Interpretive Review of Empirical Measurement

Empirical studies of economies of size in agriculture have generally found the cost curve to be “L”‐shaped. Changes in the structure of agriculture over time are not necessarily consistent with this cost structure. These differences can be reconciled by appeal to external, non‐size factors, and to difficulties in correctly measuring size economies. In addition to size economies, important factors affecting the size structure of agriculture include pecuniary economies at the firm and industry level, technical change, management and information, values and goals, and opportunity costs outside the agricultural sector. Size economies may be incorrectly measured due to poor data, misspecified technologies, unrealistic assumptions, and aggregation error.