Agglomeration Externalities and Technical Efficiency in Pig Production

The objective of the paper is to assess the effects of agglomeration on technical efficiency of French pig farms. We use a two-stage method to evaluate the effects of agglomeration on technical efficiency. The first stage consists in calculating pig activity’s efficiency scores with the non-parametric method Data Envelopment Analysis (DEA). The second stage is a truncated regression of these scores on agglomeration variables. Data are for 899 French pig producers in 2004. Results suggest that these farms were as much affected by positive agglomeration externalities (that are knowledge spillovers due to farms’ density, and also arise from farms’ closeness to downstream market) as any other businesses. There was however no evidence of negative externalities in the form of constraints in farmers’ land demand due to legal disposition relating to manure spreading.