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A Fourier analysis of the US dairy industry

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  • Tristan D. Skolrud
  • C. Richard Shumway

Abstract

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.

Suggested Citation

  • Tristan D. Skolrud & C. Richard Shumway, 2013. "A Fourier analysis of the US dairy industry," Applied Economics, Taylor & Francis Journals, vol. 45(14), pages 1887-1895, May.
    • Handle: RePEc:taf:applec:45:y:2013:i:14:p:1887-1895
    DOI: 10.1080/00036846.2011.648319
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    1. Yoder, Jonathan K. & Ohler, Adrienne M. & Chouinard, Hayley H., 2014. "What floats your boat? Preference revelation from lotteries over complex goods," Journal of Environmental Economics and Management, Elsevier, vol. 67(3), pages 412-430.
    2. Tristan D. Skolrud, 2017. "Reducing Approximation Error in the Fourier Flexible Functional Form," Econometrics, MDPI, vol. 5(4), pages 1-16, December.

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