Technical Change and Productive Inefficiency Change in Norwegian Salmon Farming: The Influence of Regional Agglomeration Externalities
By Ragnar Tveteras and George Battese
ABSTRACT
This paper analyses the factors explaining catch-up of inefficient salmon farms during the period, 1985 to 1995. We specify a stochastic frontier production model with technical inefficiency effects specified as a function of farm size, farm age and the level of agglomeration externalities that are proxied by regional industry characteristics. Agglomeration externalities to the production frontier are also tested for, since we hypothesize that such externalities can also contribute to shifting the frontier. The model is estimated on a rich panel data set with 2738 observations on 577 farms. During the data period, several important technological innovations were introduced. The magnitude of the technical inefficiency effects is related both to observable farm characteristics and regional characteristics. These relationships are consistent with expectations based on theory and a priori knowledge of the industry. Our results confirm the importance of agglomeration externalities for the productivity of salmon farms.
KEYWORDS: salmon aquaculture, agglomeration, production frontier
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