Testing for Constant Returns to Scale and Perfect Competition in the Israeli Economy, 1980-2006

Joseph Djivre () and Yigal Menashe ()
Additional contact information
Joseph Djivre: Bank of Israel
Yigal Menashe: Bank of Israel

No 2009.07, Bank of Israel Working Papers from Bank of Israel

Abstract: In this paper we test the hypothesis of constant returns to scale and no market power, implementing Hall's test (1988, 1991) on Israeli annual real business-sector GDP data. The results validate the hypothesis of perfect competition at the aggregate level. Thus on the one hand they justify the imposition of the CRS restriction when estimating the business-sector GDP production function in Israel and on the other, they contradict the assumption of CRS with market power and fixed entry costs in the modeling of the Israeli economy.

Keywords: returns to scale; market power; TFP; Solow residual; capacity utilization (search for similar items in EconPapers)
JEL-codes: E22 E32 F12 L16 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2009-07
References: Add references at CitEc
Citations:

Downloads: (external link)
https://boiwebrepec.azurefd.net/RePEc/boi/wpaper/WP_2009.07.pdf First version, 2009 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boi:wpaper:2009.07

Access Statistics for this paper

More papers in Bank of Israel Working Papers from Bank of Israel Contact information at EDIRC.
Bibliographic data for series maintained by Yossi Yakhin ().