Getu Hailu, B. James Deaton
This paper examines the agglomeration hypothesis, which states that a firm’s productive efficiency is increased by closer proximity to other firms. Using a stochastic input distant function with heteroskedastic inefficiency effects, we find that the density of Ontario dairy farms has a significant positive economic effect on production efficiency. The finding has implications for understanding agricultural firm location and farmer-led efforts to preserve agricultural farming activities in specific locations.
Publication: American Journal of Agricultural Economics, 98:1055-1073
Date: June, 2016