Agricultural Prices, Selection, and the Evolution of Food Industry

In this paper, we set up a simple model that explains the relation between low input price, high exit rates and industrial oncentration. More precisely, we argue that falling input prices force firms with low productivity to exit and induce expansion of more efficient incumbents at the expense of less productive producers. Our model helps reconcile some well‐established empirical results regarding the food processing industry. Indeed, agricultural prices have been declining between the early 1900s until 2006 while, over the same period, concentration and firm productivity have been increasing in the agri‐food industry.


Editor(s):
Larue, Bruno
Issue Date:
2012-06
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/125221
Total Pages:
26
JEL Codes:
D24; L11; L25; L66
Series Statement:
SPAA working papers
2012-5




 Record created 2017-04-01, last modified 2017-08-22

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