Results
How do cost function estimates compare to other studies?
The purpose of this research is to examine the impact of food safety technology and performance
of sanitation and process control effort on plant costs. Before discussing the results, some model
diagnostics are examined. First, notice that the R2 statistics (bottom of table 2a) are a little lower
than in other cost studies, but still quite high for a model using cross-sectional data. Second,
tests of monotonicity show no violations of that condition. Third, since marginal costs are
positive for all observations, there were no violations of the regularity condition.
The parameters on the first order price variables give factor cost shares in 2002 at the
sample mean plant size and should be comparable to cost share estimates from other studies.
Labor cost shares varied from 11.2 percent for meat slaughter to 19.9 percent for poultry
slaughter and processing. Meat/material shares ranged from 79.5 for meat slaughter to 65.8
percent for meat processing and the capital cost share went from 9.4 percent in meat slaughter to
14.9 percent in meat processing.
The labor share for meat slaughter is about the same as that reported for hog slaughter in
MacDonald and Ollinger (2000) and above that for cattle slaughter provided by MacDonald and
Ollinger (2005). The poultry slaughter labor share is below that provided in Ollinger and
MacDonald (2005). The meat/materials share for meat slaughter was between that for hog and
cattle slaughter given in MacDonald and Ollinger (2000, 2005) and the poultry meat/materials
share was similar to that for poultry shown in Ollinger and MacDonald (2005).
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