Abstract:
This paper analyses the factors explaining productivity and efficiency differences across salmon aquaculture farms,
with an emphasis on agglomeration externalities. We specify a stochastic frontier production model with agglomeration
indexes included in both the frontier production function and the technical inefficiency model. The frontier model is
estimated on a rich panel data set with 2,738 observations on 577 farms. Our results confirm the importance of agglomeration
externalities for the productivity and technical inefficiency of salmon farms. Both frontier output and technical efficiency
increase with increasing regional industry size. There is a negative relationship between overall productivity and regional
farm density, suggesting the presence of negative biological congestion externalities. These results have implications for the
Norwegian government’s regulation of the industry, since the government, to a large extent, has determined the spatial
distribution of salmon production through a licence system.
