Diseconomies of Size with Fixed Managerial Ability |
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Authors: | Antonio Alvarez Carlos Arias |
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Affiliation: | Antonio Alvarez is associate professor, Department of Economics, University of Oviedo;;Carlos Arias is associate professor, Department of Economics, University of Leon. |
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Abstract: | Managerial ability has important implications for farm growth. In this article we first show in a production model that increasing output with a fixed level of managerial ability can lead to a decrease in profits. Next, we discuss the effect that managerial ability has on economies of size. In the empirical part, economies of size are estimated for a sample of dairy farms using a proxy for managerial ability, which is calculated as a technical efficiency index. The results show that increasing farm size while holding managerial ability constant can be an important source of diseconomies of size. |
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Keywords: | cost function dairy economies of size efficiency, managerial ability |
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