A Note on the Degree of Scale Economies when Firms Make Technology Choice

Koji Shintaku

Discussion papers from Graduate School of Economics , Kyoto University

Abstract: We construct a simple model to demonstrate how the rm-level degree of scale economies (D-SE) is determined when rms make technology choice. In particular, we illustrate the importance of factors external to rms that affect the efficiency of rms' technology choice, when determining D-SE. We interpret the external factors as public knowledge stock. A change in public knowledge stock affects D-SE both directly through knowledge spillover reinforcing technology choice and indirectly through a change in the rm's output. When output is endogenized in a monopolistic competition model with a variable mark-up rate, an increase in public knowledge stock raises D-SE through technology upgrading if the mark- up rate is increasing in output. This can be testable because public knowledge stock has some measurements. There is an policy implication that various policies with knowledge stock affect D-SE as policies with xed costs.

Keywords: disasters; Degree of scale economies; Technology choice; Public knowledge stock; Knowledge spillover; Variable mark-up rate. (search for similar items in EconPapers)
JEL-codes: D21 D24 F10 F12 L11 L16 (search for similar items in EconPapers)
Pages: 18
Date: 2018-03
New Economics Papers: this item is included in nep-ind
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