OUTSOURCING DECISIONS OF PIG PRODUCERS IN BADEN-WÜRTTEMBERG Report as inadecuate




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The global trend of industrializing agriculture increasingly transforms farms and firms intospecialized component suppliers within a multi-stage food processing chain, which creates intraindustrytrade between- and within geographical regions. This can be analyzed within the frameworkof a hypothetical multiregional food-processing firm that benefits from outsourcing of various ‘tasks’to other sub-contracting regions, in order to utilize lower production cost there. This paperdemonstrates how this can be modeled as a multi-output cost minimization problem of the processingfirm, and it is argued that with respect to agriculture, the outsourcing opportunities for the firm aredetermined by economies of diversification. Trade is implicitly reflected as the movement ofintermediate factors towards the processing firm, and firm-level specialization of the sub-contractors isan observable outcome. This framework is applied to pig production in 1155 municipalities in southernGermany that can be interpreted as ‘almost firm-level’ data. The estimated multi-output productionfrontier is decomposed according to a primal measure of diversification economies. Results show thatpig farms located closer to slaughterhouses tend to specialize more in one of the tasks ‘pigletproduction’, ‘rearing’ or ‘fattening’, while farms in regions distant from slaughterhouses tend to insourceall of these tasks. Future research may extend the framework towards comparative staticanalyses of relevant policies.

Keywords: Outsourcing ; Trade of Tasks ; Economies of Diversification ; Pig Production ; Schweineproduktion

Variant title: OUTSOURCING IN DER BADEN-WÜRTTEMBERGISCHEN SCHWEINEPRODUKTION

Subject(s): Agribusiness

Agricultural and Food Policy

Food Consumption/Nutrition/Food Safety

Livestock Production/Industries

Issue Date: 2011

Publication Type: Conference Paper/ Presentation

PURL Identifier: http://purl.umn.edu/114509

Total Pages: 13

Record appears in: German Association of Agricultural Economists (GEWISOLA) > 51st Annual Conference, Halle, Germany, September 28-30, 2011





Author: Hess, Sebastian

Source: http://ageconsearch.umn.edu/record/114509?ln=en







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