Returns to scale in U.S. production: estimates and implications

Susanto Basu and John Fernald ()

No 546, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: A typical (roughly) two-digit industry in the United States appears to have constant or slightly decreasing returns to scale. Three puzzles emerge, however. First, estimates tend to rise at higher levels of aggregation. Second, estimates of decreasing returns in many industries contradict evidence of only small economic profits. Third, estimates using value added differ substantially from those using gross output, and appear less robust. These puzzles are inconsistent with a representative firm paradigm, but are consistent with simple stories of aggregation over heterogeneous units. We discuss implications of this heterogeneity for recent models of imperfect competition in macroeconomics.

Keywords: Business cycles; Production (Economic theory) (search for similar items in EconPapers)
Date: 1996
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (122)

Downloads: (external link)
http://www.federalreserve.gov/pubs/ifdp/1996/546/default.htm (text/html)
http://www.federalreserve.gov/pubs/ifdp/1996/546/ifdp546.pdf (application/pdf)

Related works:
Journal Article: Returns to Scale in U.S. Production: Estimates and Implications (1997)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:546

Access Statistics for this paper

More papers in International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().