Scale Economy Measures and Subequilibrium Impacts

Catherine Paul

Journal of Productivity Analysis, 1999, vol. 11, issue 1, 55-66

Abstract: Morrison (1985), Morrison and Siegel (1997) and Morrison and Schwartz (1994) have suggested using an expression for “total” scale or cost economies to disentangle determinants of cost efficiency, including short run subequilibrium effects. Fousekis (1998) has noted that the derivation of such an expression is based on imputation of the long run, which implicitly suggests evaluation at steady state values. Measurement of elasticities imputing values not observed in the data, however, invariably requires some type of approximation. The Fousekis approach represents one view of the relevant approximation, which is not conceptually appropriate for most applications, and disallows evaluation of the implied adjustment process to long run values. This article highlights the underlying assumptions that raise questions about this approach, and overviews alternative approaches to and rationales for computing these types of elasticity estimates. Copyright Kluwer Academic Publishers 1999

Keywords: costs; scale economies; utilization; short and long run; subequilibrium (search for similar items in EconPapers)
Date: 1999
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DOI: 10.1023/A:1007783305190

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