Do the Largest Firms Grow the Fastest? The Case of U.S. Dairies

Do the Largest Firms Grow the Fastest?
The Case of U.S. Dairies

Abstract

We analyze growth and diversification of U.S. dairy farms by examining longitudinal
changes in ten size cohorts and new entrants through three successive censuses. Gibrat’s
law (random walk) and mean reversion hypotheses of growth are tested and rejected.
Growth rates are bimodal with the largest farm cohort growing the fastest. All cohorts
become more diversified over time, and smaller farms diversify most rapidly. New
entrants are generally large, and they diversify more rapidly than incumbents. These data
suggest that scale economies persist even for the largest cohort of dairy farms and that
scale economies dominate scope economies for large farms.

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