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Returns To Scale In Retail Trade

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  • Gur Ofer

Abstract

This paper attempts to estimate genuine scale effects in retail trade from a cross section of retail stores in Israel. This is done by estimating a simple production function for several retail branches and employing the faithful old direct Cobb‐Douglas structure with value added as output and labor and capital inputs. And indeed despite the well‐known peculiarities of the retail industry, a cross section estimation produces “normal” production‐function estimates with reasonable input elasticities. The estimates also identify marked increasing returns‐to‐scale parameters, higher in food and lower in branches less affected by consumer participation and geographical dispersion. These increasing returns may explain a good part of the increase in sales per unit of inputs observed in time series.

Suggested Citation

  • Gur Ofer, 1973. "Returns To Scale In Retail Trade," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 19(4), pages 363-384, December.
    • Handle: RePEc:bla:revinw:v:19:y:1973:i:4:p:363-384
    DOI: 10.1111/j.1475-4991.1973.tb00897.x
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    Cited by:

    1. Florin Maican & Matilda Orth, 2017. "Productivity Dynamics and the Role of ‘Big-Box’ Entrants in Retailing," Journal of Industrial Economics, Wiley Blackwell, vol. 65(2), pages 397-438, June.
    2. Satya P. Das & Anuradha Saha, 2015. "Growth of business services: A supply‐side hypothesis," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 48(1), pages 83-109, February.
    3. Keh, Hean Tat & Chu, Singfat, 2003. "Retail productivity and scale economies at the firm level: a DEA approach," Omega, Elsevier, vol. 31(2), pages 75-82, April.
    4. Martin Neil Baily, 1993. "Competition, Regulation, and Efficiency in Service Industries," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2 Microec), pages 71-159.
    5. James H. Anderson, 2002. "The Distribution Sector and the Development Process: are there Patterns? Yes," Economic Inquiry, Western Economic Association International, vol. 40(2), pages 166-176, April.
    6. Patalinghug Jason C., 2019. "Estimation of a Production Function for Philippine Retail Stores," Economics, Sciendo, vol. 7(1), pages 69-79, June.
    7. Maican, Florin & Orth, Matilda, 2015. "A dynamic analysis of entry regulations and productivity in retail trade," International Journal of Industrial Organization, Elsevier, vol. 40(C), pages 67-80.
    8. Roger Betancourt & Monica Cortiñas & Margarita Elorz & Jose Mugica, 2007. "The demand for and the supply of distribution services: A basis for the analysis of customer satisfaction in retailing," Quantitative Marketing and Economics (QME), Springer, vol. 5(3), pages 293-312, September.

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