 A Note on Capacity Utilization and Measurement of Scale EconomiesTae Hoon Oum, Michael W Tretheway and Yimin Zhang Journal of Business & Economic Statistics, 1991, vol. 9, issue 1, 119-23 Abstract: This article investigates the measurement of returns to scale (RTS) via a cost function in the presence of quasi-fixed inputs. Caves, Christensen, and Swanson (CCS) proposed estimation of a variable-cost function and derived a formula for computing RTS from it. This article extends the CCS results by (1) investigating the bias that would result from erroneously using a total-cost function for measuring RTS, (2) indicating that the CCS procedure for measuring scale economies in the presence of quasi-fixed inputs is inconsistent for the case of nonhomothetic production technology, and (3) proposing an alternative procedure that allows one to evaluate RTS at long-run equilibrium points, even when firms in the sampler are disequilibrium. The similarity between this proposed method and the "temporary" equilibrium approach for measuring productivity growth is noted as well. The empirical results on RTS are compared among the three alternstive moethods (total-cost, CCS variable-cost, and proposed long-run equilibrium. Date: 1991 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:9:y:1991:i:1:p:119-23 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Business & Economic Statistics is currently edited by Jonathan H. Wright and Keisuke Hirano More articles in Journal of Business & Economic Statistics from American Statistical Association |
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