Agglomeration externalities and technical efficiency in French pig production

The objective of the paper is to assess the effects of spatial agglomeration on the technical efficiency of French pig farms. We use a two-stage method with the first stage consisting of calculating the efficiency scores of pig activity with the non-parametric Data Envelopment Analysis (DEA) method, and the second stage being a regression of these scores on agglomeration variables. Data consist of 936 French pig producers in 2004. Results suggest that these farms were as much affected by positive agglomeration externalities (in the form of knowledge spillovers due to the density of farms, and arising from their closeness to downstream markets) as any other businesses. Our analysis also sheds light on the specificity of the sector, namely that environment pressures can force pig farmers to be more efficient, an effect that may be counteracted when legal dispositions relating to manure spreading are too stringent.