Industrial agglomeration and production costs in Norwegian salmon aquaculture
Journal article, Peer reviewed
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http://hdl.handle.net/11250/183716Utgivelsesdato
2002Metadata
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Originalversjon
Tveterås, R. (2002) Industrial agglomeration and production costs in Norwegian salmon aquaculture. Marine Resource Economics, 17, pp. 1-22Sammendrag
During the last decade, empirical evidence of regional agglomeration
economies has emerged for some industries. This paper argues that externalities
from agglomeration are not only present in some manufacturing and service
sectors, but can also occur in primary industries, such as aquaculture. Econometric
analyses in this literature have primarily estimated rather restrictive
production function specifications on aggregated industry data. Here, cost functions
are estimated on firm-level observations of Norwegian salmon aquaculture
farms. This approach provides us with measures of the cost savings due to agglomeration
externalities. Furthermore, we avoid aggregation biases and can
test a rich set of hypotheses on how these externalities affect the structure of
costs at the firm level. According to the econometric estimates, there are significant
cost savings associated with localization in regions with a large salmon
aquaculture industry, suggesting the presence of positive agglomeration externalities.
In fact, the results here suggest that for small firms localized in
clusters, agglomeration externalities can compensate for internal economies of
scale, making them competitive relative to larger firms localized outside clusters.
The econometric results imply that there are significant welfare gains to be
made from changes in the government regulation of the industry.