O-Ring Production on U.S. Hog Farms: Joint Choices of Farm Size, Technology, and Compensation

Li Yu () and Peter Orazem

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: We hypothesize that hog production can be characterized by complementarities between new technologies, worker skills and farms size. Such production processes are consistent with Kremer's (1993) O-ring production theory in which a single mistake in any one of several complementary tasks in a firm's production process can lead to catastrophic failure of the product's value. In hog production, mistakes that introduce disease or pathogens into the production facility can cause a total loss of the herd. Consistent with predictions derived from the O-ring theory, we provide evidence that the most skilled workers concentrate in the largest and most technologically advanced farms and are paid more than comparable workers on smaller farms. These findings suggest that worker skills, new technologies and farm size are complements in production. The complementarities create returns to scale to large hog confinements, consistent with the dramatic increase in market share of very large farms over the past 20 years.

Keywords: complementarity; human capital; sorting; technology; farm size; Wages; hogs; O-ring; unobserved skill (search for similar items in EconPapers)
JEL-codes: J43 L11 O33 (search for similar items in EconPapers)
Date: 2011-01-28
New Economics Papers: this item is included in nep-bec, nep-hrm and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Agricultural Economics, July 2014, vol. 45 no. 4, pp. 431-442

Downloads: (external link)
http://www2.econ.iastate.edu/papers/p3890-2011-01-28.pdf (application/pdf)
http://onlinelibrary.wiley.com/doi/10.1111/agec.12097/pdf

Related works:
Journal Article: O-Ring production on U.S. hog farms: joint choices of farm size, technology, and compensation (2014)
Working Paper: O-Ring production on U.S. hog farms: joint choices of farm size, technology, and compensation (2014)
Working Paper: O-Ring Production on U.S. Hog Farms: Joint Choices of Farm Size, Technology, and Compensation (2011)
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:isu:genres:12992

Access Statistics for this paper

More papers in Staff General Research Papers Archive from Iowa State University, Department of Economics Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070. Contact information at EDIRC.
Bibliographic data for series maintained by Curtis Balmer ().