Returns to Scale and Externalities in the Consumption and Investment Sectors

Sharon Harrison

Review of Economic Dynamics, 2003, vol. 6, issue 4, 963-976

Abstract: Using data on US manufacturing, I estimate internal returns to scale and external effects for the consumption and investment sectors. I construct panels of data at the industry level and use results of gross output production function estimation to derive implied estimates in a value added specification. For the investment sector, returns to scale appear to be slightly increasing, with evidence of a positive external effect. For consumption, the evidence indicates decreasing to constant returns to scale. I discuss the implications of these results for the empirical plausibility of indeterminacy in recent multi-sector models of the business cycle. (Copyright: Elsevier)

Keywords: Production function; Sector-specific externalities; Increasing returns to scale (search for similar items in EconPapers)
JEL-codes: C33 D24 E32 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (47)

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DOI: 10.1016/S1094-2025(03)00034-6

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