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A Fourier analysis of the US dairy industry

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Measurement of economies of scale and scope is particularly important for predicting growth and product diversification. However, estimates are useful only to the extent the underlying production technology is modelled accurately. This study measures economies of scale and scope in the rapidly changing US dairy industry with a Fourier flexible cost function, which provides a global approximation of the unknown function. We use the high quality national Agricultural and Resource Management Survey (ARMS) survey data. We find economies of scale at most firm sizes and persistent economies of scope across firm sizes in this industry, which is counter to estimates from two Diewert‐flexible functional forms.

Keywords: D24; Fourier flexible form; L25; dairy; economies of scale; economies of scope

Document Type: Research Article


Affiliations: 1: Department of Economic Sciences,Washington State University, Pullman, USA 2: School of Economic Sciences,Washington State University, Hulbert 103C, Pullman 99164-6210, USA

Publication date: 2013-05-01

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