Estimating economies of scale and scope with flexible technology

Thomas Triebs, David Saal, Pablo Arocena and Subal Kumbhakar

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: Economies of scope are typically modelled and estimated using a cost function that is common to all firms in an industry irrespective of their type, e.g. whether they specialize in a single output or produce multiple outputs. Instead, we estimate a flexible technology model that allows for type-specific technologies and show how it can be estimated using linear parametric forms including the translog. A common technology remains a special case of our model and is testable econometrically. Our sample, of publicly owned US electric utilities, does not support a common technology for integrated and specialized firms. Our empirical results therefore suggest that assuming a common technology might bias estimates of economies of scale and scope. Thus, how we model the production technology clearly influences the policy conclusions we draw from its characteristics.

Date: 2016
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Citations: View citations in EconPapers (23)

Published in Journal of Productivity Analysis 2 45(2016): pp. 173-186

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Related works:
Journal Article: Estimating economies of scale and scope with flexible technology (2016)
Journal Article: Estimating economies of scale and scope with flexible technology (2016)
Working Paper: Estimating Economies of Scale and Scope with Flexible Technology (2012)
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