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Scale Economies Estimation in the Pork Meat Industry in Chile

DOI: 10.4067/S0365-28072007000300008

Keywords: return to scale, pork meat industry.

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Abstract:

the pork meat industry in chile exhibits significant rates of production growth, with a decreasing trend in the wholesale market price and growing levels of concentration of the supply in a reduced number of companies. the structural element that sustains concentration and expansion of the production is the presence of increasing returns to scale in the production process. this investigation had the objective to verify the presence of economies of scale in this industry. using a cobb-douglas cost function and the assumption of maximization of the benefits of the company in imperfect competition markets, an econometric model was estimated, that allowed considering indirectly the coefficients of the function of underlying production. one was that for the period 1975-2005, the industry presented increasing returns to scale, with an elasticity product-scale of 1.23 and economies of scale, with elasticity cost-production of 0.81. it was concluded that this industry shows conditions to increase its advantage in costs and of expanding its competitiveness in international markets.

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