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Agricultural Prices, Selection, and the Evolution of the Food Industry

Carl Gaigné and Léo Le Mener
Authors registered in the RePEc Author Service: Carl Gaigne

American Journal of Agricultural Economics, 2014, vol. 96, issue 3, 884-902

Abstract: We present a model that explains the relationship between low input prices, high exit rates, and industrial concentration. We argue that falling input prices force less productive firms to exit the market, and lead to the expansion of more efficient incumbents at the expense of less productive producers. Our model helps reconcile some well-established empirical results regarding the food processing industry. Indeed, agricultural prices fell between the early 1900s and 2006, and over the same period there was a trend towards higher concentration in the food industry, with an increase in average productivity.

Date: 2014
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Working Paper: Agricultural Prices, Selection, and the Evolution of Food Industry (2012) Downloads
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