Do the Largest Firms Grow and Diversify the Fastest? The Case of U.S. Dairies

We analyze growth and diversification of U.S. dairy farms by examining changes in ten size cohorts and new entrants through three successive censuses. We reject Gibrat's law and the mean reversion hypothesis of growth. Growth rates appear bimodal where the smallest and largest farm cohorts grow...

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Bibliographic Details
Published in:Applied economic perspectives and policy 2009, Vol.31 (2), p.284-302
Main Authors: Melhim, Almuhanad, O'Donoghue, Erik J, Shumway, C. Richard
Format: Article
Language:English
Subjects:
Agricultural economics
Applied Analyses
Business growth
Crop diversification
Crop economics
Crops
dairies
Dairy cattle
Dairy farming
Dairy farms
Dairy industry
econometric models
Economies of scale
Farm economics
farm size
farm structure
Hypotheses
Incumbents
Industrial agriculture
Studies
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Summary:We analyze growth and diversification of U.S. dairy farms by examining changes in ten size cohorts and new entrants through three successive censuses. We reject Gibrat's law and the mean reversion hypothesis of growth. Growth rates appear bimodal where the smallest and largest farm cohorts grow fastest. All cohorts diversify but the largest farms do not diversify as rapidly as medium-sized farms. New entrants are generally large, and they diversify more rapidly than comparably sized incumbents do. These data suggest that scale economies persist even for the largest cohort of U.S. dairy farms and scale economies dominate scope economies for large farms.
ISSN:1058-7195
2040-5790
1467-9353
2040-5804
DOI:10.1111/j.1467-9353.2009.01438.x