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Scale Economy Measures and Subequilibrium Impacts

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  • Catherine Paul

Abstract

Morrison (1985), Morrison and Siegel (1997) and Morrison and Schwartz (1994) have suggested using an expression for “total” scale or cost economies to disentangle determinants of cost efficiency, including short run subequilibrium effects. Fousekis (1998) has noted that the derivation of such an expression is based on imputation of the long run, which implicitly suggests evaluation at steady state values. Measurement of elasticities imputing values not observed in the data, however, invariably requires some type of approximation. The Fousekis approach represents one view of the relevant approximation, which is not conceptually appropriate for most applications, and disallows evaluation of the implied adjustment process to long run values. This article highlights the underlying assumptions that raise questions about this approach, and overviews alternative approaches to and rationales for computing these types of elasticity estimates. Copyright Kluwer Academic Publishers 1999

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  • Catherine Paul, 1999. "Scale Economy Measures and Subequilibrium Impacts," Journal of Productivity Analysis, Springer, vol. 11(1), pages 55-66, February.
    • Handle: RePEc:kap:jproda:v:11:y:1999:i:1:p:55-66
    DOI: 10.1023/A:1007783305190
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    1. Catherine J. Morrison & Donald Siegel, 1997. "External Capital Factors And Increasing Returns In U.S. Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 647-654, November.
    2. Panos Fousekis, 1999. "Temporary Equilibrium, Full Equilibrium, and Elasticity of Cost," Journal of Productivity Analysis, Springer, vol. 11(1), pages 43-54, February.
    3. Morrison, Catherine J, 1985. "Primal and Dual Capacity Utilization: An Application to Productivity Measurement in the U.S. Automobile Industry," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 312-324, October.
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    Cited by:

    1. Giannis Karagiannis & George Mergos, 2000. "Total Factor Productivity Growth and Technical Change in a Profit Function Framework," Journal of Productivity Analysis, Springer, vol. 14(1), pages 31-51, July.
    2. Catherine J. Morrison Paul, 2003. "Cost Economies: A Driving Force for Consolidation and Concentration?," Southern Economic Journal, John Wiley & Sons, vol. 70(1), pages 110-127, July.

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