Diseconomies of Size with Fixed Managerial Ability

Antonio Alvarez and Carlos Arias ()

American Journal of Agricultural Economics, 2003, vol. 85, issue 1, 134-142

Abstract: Managerial ability has important implications for farm growth. In this article we first show in a production model that increasing output with a fixed level of managerial ability can lead to a decrease in profits. Next, we discuss the effect that managerial ability has on economies of size. In the empirical part, economies of size are estimated for a sample of dairy farms using a proxy for managerial ability, which is calculated as a technical efficiency index. The results show that increasing farm size while holding managerial ability constant can be an important source of diseconomies of size. Copyright 2003, Oxford University Press.

Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:85:y:2003:i:1:p:134-142

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