Scale economies and consolidation in hog slaughter

We use establishment based panel data to estimate a cost function which ide ntifier the role of scale economies in hog slaughter consolidation. We find modest but extensive technological scale economies in the 1990s, and they became more important over time. But wages rose sharply with plant size thr ough the 1970s, and those wage premiums generated a pecuniary scale disecon omy that largely offset the effects of technological scale economies, nle s ize wage relation disappeared in the 1980s: with growing technological scal e economies and disappearing pecuniary diseconomies, large plants realized growing cost advantages over smaller plants, and production shifted to larg er plants.