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IV. Approach

4.1 The Methodological Challenges

The primary methodological challenges of empirical work on the scaling-up of livestock production are to define a quantitative measure of relative farm competitiveness in production, and then to look in a structured way at all the factors that differ across farms that might explain higher relative competitiveness. These factors include technical and allocative efficiency, asymmetries in access to assets (credit, liquidity, fixed capital, etc.) and information (education, experience, etc.), externalities (some farmers get away with uncompensated pollution while others do not), and policies (some get a better deal from the State than others).

The omission of relevant factors leads to biased estimates. Furthermore, inclusion of explanatory factors of relative competitiveness that are themselves functions of relative competitiveness leads to simultaneity bias. For example, relative competitiveness might be enhanced through being recognized as a sales leader, but being recognized as a sales leader may depend on being more competitive than others. The two-way causality among the variables leads to bias in the empirical estimation of the effect of all variables unless appropriate procedures are used.

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