Adjustment Costs and Returns to Scale: Some Theoretical and Empirical Aspects
G. Campbell Watkins
The Energy Journal, 1993, vol. Volume 14, issue Number 1, 257-280
In specifying third generation models of factor demands, adjustment costs are frequently treated as a function of net rather than gross investment. Such specifications assume replacement investment is frictionless and in equilibrium adjustment costs are zero. Recognition that adjustment costs may reflect not only net but also gross investment leads to a more complex model. But the revised model implies increasing long-run average costs. Such a model can still be specified to impose constant long-run average costs, or constant returns to scale. The latter condition is often desirable to avoid confusion in estimating technological progress. However, empirical work suggests that conventionally labelled expressions of adjustment costs embrace other influences. Proper measurement and identification of such costs may well require more finely tuned approaches.
JEL-codes: F0 (search for similar items in EconPapers)
References: Add references at CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to IAEE members and subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:aen:journl:1993v14-01-a11
Ordering information: This journal article can be ordered from
Access Statistics for this article
More articles in The Energy Journal from International Association for Energy Economics Contact information at EDIRC.
Bibliographic data for series maintained by David Williams ().