In this study we analysed the impact of
agglomeration externalities, input and output market
access, and environmental regulations on the location
of pig production in 1999 and 2004 in Denmark. The
results show that spatial externalities are important for
location of pig production, i.e. pig farms have higher
profit if there is a high concentration of pigs in the
neighbourhood. This indicates that pig farms benefit
from input sharing, labour pool matching and
knowledge spillovers. On the other hand, we found no
or only a week effect of input and output accessibility.
However, we did not expect to find a strong effect of
accessibility of slaughterhouses due to the
organisational structure of the Danish slaughterhouse
sector, i.e. farmer-owned slaughterhouses and farmers’
distance-independent payment of transport costs. The
lacking impact on location of input accessibility may
be caused by weak instruments for the accessibility of
industrial feed. Finally, we found that the
environmental regulations imply a negative
agglomeration externality. The econometrical analysis
showed that it is important to consider that
explanatory variables in a location model may be
endogenous. The analysis showed also that it is also
important to consider the potential spatial dependence
in the error terms.