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zbw Leibniz-Informationszentrum WirtschaftLeibniz Information Centre for Economics
Roosen, Jutta; Hennessy, David A.
Seasonality, capital inflexibility, and theindustrialization of animal production
FE working paper // University of Kiel, Department of Food Economics and ConsumptionStudies, No. 0401
Provided in Cooperation with:Christian-Albrechts-University of Kiel, Department of Food Economicsand Consumption Studies
Suggested Citation: Roosen, Jutta; Hennessy, David A. (2004) : Seasonality, capital inflexibility,and the industrialization of animal production, FE working paper // University of Kiel, Departmentof Food Economics and Consumption Studies, No. 0401
This Version is available at:http://hdl.handle.net/10419/38623
Seasonality, Capital Inflexibility, and the Industrialization of Animal Production
Seasonality, Capital Inflexibility, and the Industrialization of
Jutta Roosen and David A. Hennessy*
Authors are professor at the Department of Food Economics and Consumption Studies, University of Kiel, Germany, and at the Department of Economics, Iowa State University, USA, respectively. They would like to thank Oya Erdogdu, John Miranowski, HongLi Feng, and Don Blayney for comments and useful guidance.
Roosen is the corresponding author. She can be reached at Department of Food Economics and Consumption Studies, University of Kiel, Olshausenstr. 40, 24098 Kiel, Germany. Ph.: +49 431 880 4567, Fax: +49 431 880 7308, e-mail: firstname.lastname@example.org.
Seasonality, Capital Inflexibility, and the Industrialization of Animal
Among prominent recognized features of the industrialization of animal production over the past
half century are growth in the stock of inflexible, or use-dedicated capital, as an input in
production, and growth in productivity. Less recognized is a trend toward aseasonal production.
We record the deseasonalization of animal production in the US and European countries over the
past 70 years. We also suggest that A) lower seasonality can precede or Granger-cause increased
productivity due to increased capital intensity, and B) productivity improvements can Granger-
cause lower seasonality. Process A) should be more likely earlier in the industrialization
process. For US dairy production, our empirical tests find some evidence that process A)
operated early in the 20th Century while process B) operated in more recent times.
Keywords: Capital Intensity, Causality, Dairy, Regional Production Systems
Seasonality, Capital Inflexibility, and the Industrialization of Animal Production
Agriculture has become more capital intensive in most of the world during the latter part of the
20th Century. This capital deepening has occurred largely in the machinery, irrigation, and
buildings categories (Larson, Butzer, Mundlak, and Crego). The structural effects have been
particularly notable in animal agriculture in the developed world, where the phrases factory
farming and industrialized agriculture correctly depict an animal production process for hogs,
chickens, turkeys, and laying eggs that is broadly similar to the prototypical manufacture of
widgets. These large farms have increasingly automated production processes, and most workers
are employees with routinized tasks.
Field crop agriculture on the other hand, though greatly affected by mechanization and other
technological innovations, does not yet resemble an industrialized process. Allen and Lueck
argue convincingly that randomness due to weather is primarily responsible because it confounds
monitoring in the principal-agent relation, and it requires managerial focus when organizing
many mundane production activities. Strengthening control over animal agriculture has involved
largely strengthening the control of nature in the production process. Animals have been
confined, while seasonal aspects of biological behavior have been suppressed through breeding
or physiological interventions. Consequences have been the homogenization of the production
process and the growing affordability of cheap animal protein in much of the world.
Notwithstanding attention from several academic fields, the process of industrialization at
the sector level is not well-understood. This is so in agriculture and in other sectors. Most
economic studies on industrialization assume agriculture to be the reference non-industrial
sector, and their insights concerning the details of agriculture are limited. Technology in
agriculture is seen to matter because it frees up resources for other uses (Jorgenson; Scitovsky).
Kuznets does emphasize co-dependency, through spillover effects, between technical change in
agriculture and other sectors. This view sees agriculture developing along with other sectors so
that all sectors are comparably industrial. A facet of this viewpoint arises in the induced
innovation argument of Hayami and Ruttan. If the price of agricultural labor rises due to
increased demand from other sectors, then labor-saving innovations should be induced in
response over time.
Studies in economic history have shown evidence that interactions between agricultural
seasonality, non-agricultural industrialization, and productivity outside agriculture are likely
adverse because industrial plants are most efficient when labor supply is constant (Sokoloff and
Dollar; Sokoloff and Tchakerian; Anderson). Our interest is not in the role of agricultural
seasonality on external industries, but in its role on agriculture itself.
As to what industrialization is, it has many features involving firm behavior, industry
structure, the creation of new subsectors and change in the nature of sector products. We refer
the reader to Meeker, to Boehlje, or to Drabenstott on characterizations, and qualify the
components that we are interested in as primarily firm-level and industry-level behavior
regarding technologies used. The technologies should emphasize the control, systemization, and
routinization of processes in order to be more assured of product volume and quality at low cost
given the larger capital investment necessary for an industrial approach. Regarding the
efficiency effects of capital deepening, Chandler (p. 24) has written
These potential cost advantages could not be fully realized unless a constant flow of materials through the plant or factory was maintained to assure effective capital utilization. If the realized volume of flow fell below capacity, then actual costs per unit rose rapidly. They did so because fixed costs remained much higher and sunk costs (the original capital investment) were also much higher than in the more labor-intensive industries.
How industrialization arises is largely a question of structural dynamics because the process
is not instantaneous and there is no guarantee it will continue to the point where a sector or
economy is recognized as being industrialized. Some inquiries into the path taken suggest the
possibility of multiple equilibria (Murphy, Shleifer, and Vishny; Matsuyama; Gans, 1997; Chen
and Shimomura; Ciccone) so that the economy needs a big push to industrialize. As Gans
(1998) has pointed out, the existence of multiple equilibria relies on the assumption that firms
face two technology choices where one is increasing returns and the other is a constant returns
reference technology. This big push literature leads naturally to policy proposals on
engineering an equilibrium, typically a more industrial equilibrium given the increasing returns
to scale that are present. Due to its macro-economy nature, this area of work has little to say
about how the particulars of any given industry affect the industrialization process. Our interest
is focused on animal agriculture, and we intend to show that sector detail can provide insights on
The formal literature on explaining the agricultural industrialization process is quite sparse.
In one sense this is not surp