Michael Ollinger

Scale Economies and Consolidation in Hog Slaughter

We use establishment based panel data to estimate a cost function which identifies the role of scale economies in hog slaughter consolidation. We find modest by extensive technological scale economies in the 1990s, and they became more important over time. But wages rose sharply with plant size through the 1970s and those wage premiums generated a pecuniary scale diseconomy that largely offset the effects of technological scale economies. The size-wage relation disappeared in the 1980; with growing technological scale economies and disappearing pecuniary diseconomies, large plants realized growing cost advantages over smaller plants, and production shifted to larger plants.

Technological Change and Economies of Scale in U.S. Poultry Processing

This article uses a unique data set provided by the Census Bureau and a translog cost function to empirically examine technological change in the U.S. poultry industry. Results reveal substantial scale economies that show no evidence of diminishing with plant size and that are much greater than those realized in cattle and hog slaughter. Findings suggest that consolidation is likely to continue, particularly if demand growth diminishes, and that controlling for plant product mix is critical to accurate cost estimates.

Mergers and Acquisitions and Productivity in the U.S. Meat Products Industries: Evidence from the Micro Data

This article investigates the motives for mergers and acquisitions (M&As) in the U.S. meat products industry from 1977 to 1992. Results show that acquired meat and poultry plants were very productive before mergers, and that all but the very largest meat slaughter and processing plants and all but the bottom 20% of the poultry slaughter and processing plants significantly improved their productivity growth in their postmerger periods. These results lead to the conclusion that synergies and related efficiencies are important motives for M&As.

Innovation And Regulation In The Pesticide Industry

This paper examines the impact of pesticide regulation on the number of new pesticide registrations and pesticide toxicity. Results suggest that regulation adversely affects new pesticide introductions but encourages the development of pesticides with fewer toxic side effects. The estimated regression model implies that a 10% increase in regulatory costs (about

Technology, Labor Wars, and Producer Dynamics: Explaining Consolidation in Beefpacking

1.5 million per pesticide) causes a 5% reduction in the number of pesticides with higher toxicity.

Sunk costs and regulation in the U.S. pesticide industry

Beefpacking underwent a dramatic transformation in the 1970s and 1980s, as plants got much larger and industry concentration rose dramatically. We use individual Census Bureau plant records to analyze the sources of the transformation. We find that there were modest but extensive scale economies in packing plants, covering the full range of plant sizes, and that such economies became more important throughout the period of the study. As production shifted to larger plants, we estimate that the industrys aggregate processing costs fell by 35.3% by 2002, compared to what they would have been without consolidation. Copyright 2005, Oxford University Press.

US regulation and new pesticide registrations and sales

Abstract This paper examines the impact of sunk costs and market demand on the number of innovative companies, the U.S. market share of foreign-based firms, and merger choice in the U.S. Pesticide Industry. Results are consistent with Suttons (1991) view of sunk costs and market structure in that rising endogenous sunk research costs and exogenous sunk pesticide product regulation costs and declining demand negatively affect the number of firms in the industry, have a stronger negative impact on the number of smaller firms, and encourage foreign-based firm expansion.

Strategic research interests, organizational behavior, and the emerging market for the products of plant biotechnology

This article empirically examines the impact of regulation on new pesticide crop use registrations and sales. Results suggest that regulatory costs negatively affect new pesticide crop use registrations, require firms to develop only high-revenue pesticides that generate sufficient revenue to meet the higher testing costs associated with regulation, and cause a decline in minor crop pesticide registrations. From a public policy perspective, results suggest that the availability of effective chemical pesticides for minor crops, such as fruits and vegetables, will likely decline over time.

Food Safety Audits, Plant Characteristics, and Food Safety Technology Use in Meat and Poultry Plants

Abstract As plant biotechnology products become commercialized, some researchers have questioned the goals of organizations using this new technology. Just and Hueth believe that chemical/pesticide companies will dominate plant biotechnology research and will not develop plants that can substitute for chemicals. Other economists, such as Teece, believe that firm-specific resources rather than existing markets determine firm growth. In this vein, it is hypothesized that differences among pesticide and other firms leads to a diverse range of plant biotechnology-derived plants. The main conclusion is that firm-specific resources rather than existing firm business categories determine research effort. It is also concluded that since firm resources and business interests vary within organizational groupings, firms within the same industry may seek growth in diverse ways. Plant biotechnology field-test permit data is used to support these conclusions.

Scale Economies and Consolidation in Hog Slaughter: Reply

Food safety technology can increase a company’s capacity to prevent a foodborne contamination. A food safety audit — a quality control tool in which an auditor observes whether a plant’s processing practices and technologies are compatible with good food safety practices — can indicate how effectively food safety technology is being used. Fast food restaurants, grocery stores, and other major customers of meat and poultry processing plants conduct their own audits or hire auditors to assess the soundness of a plant’s processing operation. Meat and poultry plants can also audit themselves as a way to help maintain process control. In this report, we document the extent of food safety audits in meat and poultry processing plants. We also examine the associations between the use of audits and plant size, firm structure, and food safety technology use. Results show that larger plants, plants subject to food safety audits, and plants that are part of a multiplant firm use more food safety technology than other plants. Plants subject to both plant-hired and customer-hired audits had greater technology use than single (plant- or customer-hired) audit plants.