Outsourcing, Regional Trade and Specialization: An Application to in the German Pig Sector

Sebastian Hess

No 114537, 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland from European Association of Agricultural Economists

Abstract: The global trend of industrializing agriculture increasingly transforms farms and firms into specialized component suppliers within a multi-stage food processing chain, which creates intraindustry trade between- and within geographical regions. This can be analyzed within the framework of a hypothetical multiregional food-processing firm that benefits from outsourcing various ‘tasks’ to other sub-contracting regions, in order to utilize lower production cost there. This is modeled as a multi-output cost minimization problem of the processing firm, and it is argued that with respect to agriculture, the outsourcing opportunities for the firm are determined by economies of diversification. Trade is implicitly reflected as the movement of intermediate factors towards the processing firm, and firm-level specialization of the sub-contractors is an observable outcome. This framework is applied to pig production in 1150 municipalities in southern Germany. The estimated multi-output production frontier is decomposed according to a primal measure of diversification economies. Results show that pig farms located closer to slaughterhouses tend to specialize more in one of the tasks ‘piglet production’, ‘rearing’ or ‘fattening’, while farms in regions distant from slaughterhouses tend to in-source all of these tasks. Future research may extend the framework towards comparative static analyses of relevant policies.

Keywords: International Relations/Trade; Livestock Production/Industries (search for similar items in EconPapers)
Pages: 12
Date: 2011
New Economics Papers: this item is included in nep-eff and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/114537/files/Hess_Sebastian_634.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:eaae11:114537

DOI: 10.22004/ag.econ.114537

Access Statistics for this paper

More papers in 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland from European Association of Agricultural Economists Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().