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

Jean-Philippe Gervais (), Olivier Bonroy and Steve Couture
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Steve Couture: CRÉA, Laval University, 2425 Rue de l'Agriculture, Room 4412, Laval University, QC, Canada G1V 0A6, Postal: CRÉA, Laval University, 2425 Rue de l'Agriculture, Room 4412, Laval University, QC, Canada G1V 0A6

Agribusiness, 2008, vol. 24, issue 4, 538-556

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 bakery sectors. Scale elasticities suggest that increasing returns to scale are present in the 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). [JEL Classification: D240, C300]. © 2008 Wiley Periodicals, Inc.

Date: 2008
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Working Paper: A province-level analysis of economies of scale in Canadian food processing (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:agribz:v:24:y:2008:i:4:p:538-556

DOI: 10.1002/agr.20178

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