On the Nature and Magnitude of Cost Economies in Hog production
Résumé
In this paper, 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 endogeneity of feed prices is not controlled for. More specifically, cost economies for large farms (enjoying the highest profits) arise from feed prices and little by technological scale economies. In contrast, farms with no hired labour exhibit technological scale economies and reach higher price-cost margins than larger farms.