Scale effects and mark-ups in the US food and fibre industries: Capital investment and import penetration impacts

Capital investment patterns and import penetration are often alleged to inf luence firms' costs and prices, and thus economic performance. We examine t he impacts of these factors on measures of scale economies, input demand/co mposition, and market power in the US food and fibre industries. Flexible v ariable cost functions incorporating quasi-fixity of three categories of pr ivate (internal) capital and two external technological and trade (import) factors represent the cost structures of the two industries. Pricing equati ons, based on inverse demand functions including import prices, represent o utput decisions. Cost and demand elasticities constructed from this model i ndicate reduced manufacturing costs from technical and trade, scale and cap ital effects. This increased cost efficiency arises largely from materials savings in the textiles industry and reduced labour use in the food industr y. Mark-up behaviour is exhibited for most of the sample period in the text iles industry and neither industry appears heavily affected by import price s.