Farm Diversification in Rural Areas of the Västra Götaland County in Sweden : Are there Evidence of Scope Economies?

University essay from Högskolan i Jönköping/Internationella Handelshögskolan


The thesis studies the impact of the financial support of the Environmental and Rural Devel-opment Programme of 2000-2006 on farm diversification and other activities in the rural areas of the Västra Götaland County for the period 2000-2005. Furthermore, it analyses if diver-sification within the firms has improved efficiency due to economies of scope.

The statistical data of this study is based on a telephone survey of a total population of 50 firms that have received financial support for diversification, within the County of Västra Götaland. The response rate of the telephone survey was 80 per cent of the total popula-tion. The statistical analysis is based on chi-square and logit models in combination with a descriptive analysis in order to test the hypothesis of the thesis. Therefore, the empirical analysis has both a quantitative and a qualitative character.

The result of the study shows that about 87.7 per cent of the surveyed firms have diversi-fied their economic activities during the years 2000-2005. Firms owned by women tend to have diversified to a larger extent compared to men. Further, women show a tendency to be more successful with a higher degree of diversification within the service sector com-pared to men. The enterprises within the production and refinement sectors have, on the other hand, a propensity to focus on traditional agricultural production despite the diversi-fication. A majority of the interviewed firms have received benefits from scope economies, which imply that the firms utilise joint production with shared inputs. The scope econo-mies existed among studied firms previous to the support and there are no significant changes in the economies of scope due to the financial support. Overall, the financial sup-port seems to have had a positive impact on the firms’ economic situation since none of the studied firms has experienced a decline in employment, turnover or income.

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