A province-level analysis of economies of scale in Canadian food processing

Jean-Philippe Gervais (), Olivier Bonroy () and S. Couture

Working Papers from Grenoble Applied Economics Laboratory (GAEL)

Abstract: Cost functions of three Canadian food processing sectors (meat, bakery and dairy) are estimated using provincial data. A translog functional form is used and the concavity property of the cost function is imposed locally. The Morishima substitution elasticities and scale elasticities are computed for different provinces. Inference is carried out using asymptotic theory as well as bootstrap methods. The evidence suggests that there are significant substitution possibilities between the agricultural input and other production factors in the meat and bakerysectors. Scale elasticities suggest that increasing returns to scale are present in bakery and meat industries. To account for supply management in the dairy sector, separability between raw milk and other inputs was introduced. There exists evidence of increasing returns to scale at the industry level in the small producing provinces, but decreasing returns to scale in the two largest dairy provinces (Ontario and Quebec).

Keywords: TRANSLOG COST FUNCTION; FOOD PROCESSING INDUSTRY; RETURNS TO SCALE; DOUBLE BOOTSTAP (search for similar items in EconPapers)
JEL-codes: D24 C30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr and nep-eff
Date: 2007
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http://www.grenoble.inra.fr/Docs/pub/A2007/gael2007-19.pdf
http://dx.doi.org/10.1007/s11149-008-9058-z (application/pdf)

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Persistent link: http://EconPapers.repec.org/RePEc:gbl:wpaper:200710

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