Production Functions with Factor-Oriented Scale Sensitivity

Chu-Ping C Vijverberg and John C H Fei

The Review of Economics and Statistics, 1996, vol. 78, issue 2, 309-20

Abstract: It is not unreasonable to believe that most, if not all, important innovations are embodied in an industry's capital stock. The notion that the efficiency of large scale of production is brought about mainly by a larger size capital stock or a more advanced one is not new. The purpose of this paper is to search for production functions that allow the scale elasticity to vary with respect to capital stock and, at the same time, contains desirable properties of diminishing returns to labor and/or factor substitutability. There are numerous SSWK production functions. However, the objectives of this paper are to, first of all, find a general way to generate the SSWK production functions, and secondly, to find those SSWK's with certain desirable properties. Copyright 1996 by MIT Press.

Date: 1996
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