WRRCTM No. 38 Some Evidence of Economics of Scale in Hawaiian Sugar Plantations

Abstract

Of the major sectors in Oahu's economy, sugar growing and milling together use by far the largest quantities of water. The three plantations still operating on Oahu in 1971 accounted for 57 percent of total withdrawals, even though this percentage has steadily declined over the past decade or longer. A persistent trend among plantations, moreover, is for mergers to occur, presumably to take advantage of economies of scale. This study was undertaken to inquire into the effect of scale on sugar production. Data for plantations on four of the Hawaiian Islands is applied to several procedures for estimating scale economics and economic efficiency. First, a "survivorship" test is used. Then the efficiency measures developed by M. J. Farrell are calculated. Finally, some regression estimates are determined.