Returns to scale with a Cobb-Douglas production function for a small italian mechanical firm

Davide Osti ()

MPRA Paper from University Library of Munich, Germany

Abstract: with this piece of evidence, I try to she light upon the e ects of xed and variable costs on revenues for a rm operating in the sector of leathing and milling in the neighbourhood of Bologna, on the Tus- can - Emilian Appennines, through the estimation of a linear bivariate simultaneous equation model where variable and xed costs explain revenues; with a sample of eleven years of annual data, I nd that a marginal increase in variable costs of 1 euro, keeping the xed costs constants, leads to higher revenues up to 1.155 euro; I further estimate a cobb douglas production function, in order to nd out whether the returns to scale are increasing, constant or decreasing; I nd support for the hypothesis of slightly increasing returns to scale with the base- line cobb douglas transformed in logarithms (with capital and labour only), while multiplicatively including an additional regressor for raw materials purchases, I nd evidence for slightly decreasing returns to scale

Keywords: rm behaviour; production functions; returns to scale; cobb douglas; stochastic frontier model; non linear least squares; production sets; convex cones (search for similar items in EconPapers)
JEL-codes: C13 C32 D22 D24 L23 L25 L62 (search for similar items in EconPapers)
Date: 2021-11-20, Revised 2022-12-02
New Economics Papers: this item is included in nep-eff
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