Overestimates of Returns to Scale in Agriculture—A Case of Synchronized Aggregation

Yoav Kislev

American Journal of Agricultural Economics, 1966, vol. 48, issue 4_Part_I, 967-983

Abstract: Past studies of the aggregate production function of American agriculture indicate very high returns to scale. These findings are not supported by farm-level analysis. It is suggested that the aggregate estimates are biased, even if the assumption that all farms operate on the same function is accepted, due to grouping synchronized with regional effects which are not included in the analysis. An algebraic analysis of synchronized grouping is presented, and the use of covariance analysis is suggested as at least a partial correction of the bias. Empirical findings, production functions fitted to the 1949 and 1959 Census of Agriculture data, support the hypothesis of overestimates of returns to scale.

Date: 1966
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