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Testing for Vertical Economies of Scope: An Example from US Pig Production

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  • Azzeddine M. Azzam
Abstract
A firm operating in two or more stages of production is said to have vertical economies of scope if the costs of jointly producing two or more vertically adjacent products is less than the costs of producing the products independently. As important as those economies are in theory, they have so far received no empirical treatment compared to scope economies in multi‐output production, especially in agriculture. This paper tests for vertical economies of scope in US pig production, using 1990 firm‐level cost data. Based on the Wilcoxon matched‐pairs signed‐rank test, no evidence of vertical economies was found, meaning that it was no more or less costly to produce pork in a farrow‐to‐finish setting than with separate feeder‐pig production and finishing.

Suggested Citation

  • Azzeddine M. Azzam, 1998. "Testing for Vertical Economies of Scope: An Example from US Pig Production," Journal of Agricultural Economics, Wiley Blackwell, vol. 49(3), pages 427-433, September.
    • Handle: RePEc:bla:jageco:v:49:y:1998:i:3:p:427-433
    DOI: 10.1111/j.1477-9552.1998.tb01282.x
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    References listed on IDEAS

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    1. Jay T. Akridge & Thomas W. Hertel, 1986. "Multiproduct Cost Relationships for Retail Fertilizer Plants," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(4), pages 928-938.
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    7. Gilligan, Thomas & Smirlock, Michael & Marshall, William, 1984. "Scale and scope economies in the multi-product banking firm," Journal of Monetary Economics, Elsevier, vol. 13(3), pages 393-405, May.
    8. Rhodes, V. James, 1990. "U.S. Contract Production of Hogs," Miscellaneous Reports 257763, University of Missouri Columbia, Department of Agricultural Economics.
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    Cited by:

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    2. Jaroslav Havlíček & Ludmila Dömeová & Luboš Smutka & Helena Řezbová & Lucie Severová & Tomáš Šubrt & Karel Šrédl & Roman Svoboda, 2020. "Efficiency of Pig Production in the Czech Republic and in an International Context," Agriculture, MDPI, vol. 10(12), pages 1-18, December.
    3. Néstor Duch, 2005. "Vertical linkages, agglomeration and the organization of production in European regions," Working Papers 2005/6, Institut d'Economia de Barcelona (IEB).
    4. Ohe, Yasuo & Kurihara, Shinichi, 2013. "Evaluating the complementary relationship between local brand farm products and rural tourism: Evidence from Japan," Tourism Management, Elsevier, vol. 35(C), pages 278-283.
    5. Néstor Duch, 2005. "Vertical linkages, agglomeration and the organization of production in European regions," Working Papers 2005/6, Institut d'Economia de Barcelona (IEB).
    6. Mayen, Carlos D. & Balagtas, Joseph Valdes & Alexander, Corinne E., 2009. "Vertical Economies of Scope for Organic and Conventional Dairy Farms in the United States," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49409, Agricultural and Applied Economics Association.

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