The effect of agglomeration on profits and price efficiency in laying chicken farming enterprises in Payakumbuh production central area of Lima Puluh Kota Regency, west Sumatera, Indonesia

Abstract

This study analysed the effect of agglomeration on profits, and price efficiency. This study was carried out in and outside the Production Central Area (PCA) of Payakumbuh. Sixty-seven breeders in Payakumbuh PCA and 67 breeders outside Payakumbuh PCA were involved. Multiple linear regression was used for analysis. The results showed that there were two agglomeration profits in PCA: large scale economies (SE) and localization economies (LE). Urbanization economies (UE) were not found. The agglomeration profits had a significant effect on price efficiency. The difference in business location between PCA and outside PCA had no significant effect. The establishment of a PCA should take into account the agglomeration profits, which can be profitable for entrepreneurs with lower production and transportation costs due to the use of shared facilities. It is important to equip the PCA with supporting infrastructure to develop livestock business with the aim to reduce production costs, and make output competitive.

Keywords: Agglomeration profits, price efficiency, production central area