Knowledge capital and cost structure in the U.S. food and fiber industries

We explore the existence and extent of scale economies arising from three different external "knowledge capital" factors - investments in R&D, high-tech, and human capital. These relationships are evaluated for the (two- and three-digit level) food and fiber processing industries from the 1960s through the 1980s. The results generate strong evidence of scale economies but also suggest that the three knowledge capital factors have tended to reduce input use (and thus costs) for all privately demanded factors. The impacts on private capital are particularly large, although human capital appears to have a relatively large impact on labor use in the textiles industry.