Nonparametric Measures of Scale and Technical Change for Competitive Firms under Uncertainty

Paul R. Flacco and Douglas M. Larson

American Journal of Agricultural Economics, 1992, vol. 74, issue 1, 173-176

Abstract: Measures of scale elasticity and rate of technical change can be obtained nonparametrically in the Sandmo model of competitive firms with nonlinear risk preference responding to output price risk. Information on risk attitudes is not needed for measurement of scale elasticity because it is observable as the ratio of average to marginal cost, as in certainty models. The cross section of panel data sets can be used to develop a nonparametric marginal cost measure, which permits identification of scale elasticity; the technical change measure then follows from the scale measure and the time-series portion of the panel data set.

Date: 1992
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