Exit from the Meatpacking Industry: A Microdata Analysis

Abstract

Abstract We model the determinants of plant exit from the cattle‐slaughter industry using probit to distinguish between plant‐level (e.g., age, scale, and scope) and market‐level (e.g., market share, concentration, and competitive fringe) factors. Market variables are shown to be less important determinants of exit than plant‐level factors, though a significant tendency for very small plants to exit already highly concentrated markets is apparent. Government actions to stem the industry's consolidation must consider the trade‐off between welfare gains from the reduction of market power and welfare losses from foregone technological efficiency improvements.