Industrial agglomeration and production costs in Norwegian salmon aquaculture

摘要

During the last decade, empirical evidence of regional agglomerationeconomies has emerged for some industries. This paper argues that externalitiesfrom agglomeration are not only present in some manufacturing and servicesectors, but can also occur in primary industries, such as aquaculture. Econometricanalyses in this literature have primarily estimated rather restrictiveproduction function specifications on aggregated industry data. Here, cost functionsare estimated on firm-level observations of Norwegian salmon aquaculturefarms. This approach provides us with measures of the cost savings due to agglomerationexternalities. Furthermore, we avoid aggregation biases and cantest a rich set of hypotheses on how these externalities affect the structure ofcosts at the firm level. According to the econometric estimates, there are significantcost savings associated with localization in regions with a large salmonaquaculture industry, suggesting the presence of positive agglomeration externalities.In fact, the results here suggest that for small firms localized inclusters, agglomeration externalities can compensate for internal economies ofscale, making them competitive relative to larger firms localized outside clusters.The econometric results imply that there are significant welfare gains to bemade from changes in the government regulation of the industry.