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Returns to scale and curvature in the presence of spillovers: evidence from European countries

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  • Anthony J. Glass
  • Karligash Kenjegalieva
  • Robin C. Sickles

Abstract

Drawing on a recent development on the interpretation of spatial econometric models, we extend two classic characteristics of production (returns to scale and diminishing marginal productivity of factor inputs) to the spatial case. In the context of a spatial translog production function we define internal (i.e., direct), external (i.e., indirect), and total (direct plus indirect) returns to scale. The spatial production function gives rise to direct, indirect, and total productions functions so we set out empirical checks to establish if these functions are concave. The ideas of spatial returns to scale and spatial concavity/convexity can easily be applied to other technologies (e.g., cost and distance functions) and other functional forms (e.g., Cobb-Douglas). We apply these ideas to aggregate production of European countries using balanced panel data for the period 1990–2011.

Suggested Citation

  • Anthony J. Glass & Karligash Kenjegalieva & Robin C. Sickles, 2016. "Returns to scale and curvature in the presence of spillovers: evidence from European countries," Oxford Economic Papers, Oxford University Press, vol. 68(1), pages 40-63.
    • Handle: RePEc:oup:oxecpp:v:68:y:2016:i:1:p:40-63.
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    File URL: http://hdl.handle.net/10.1093/oep/gpv052
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    Cited by:

    1. Han, Jaepil & Sickles, Robin C., 2019. "Estimation of Industry-level Productivity with Cross-sectional Dependence by Using Spatial Analysis," Working Papers 19-002, Rice University, Department of Economics.
    2. Orea, Luis & Álvarez, Inmaculada C., 2019. "Spatial Production Economics," Efficiency Series Papers 2019/06, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    3. Glass, Anthony J. & Kenjegaliev, Amangeldi & Kenjegalieva, Karligash, 2020. "Spatial scale and product mix economies in U.S. banking with simultaneous spillover regimes," European Journal of Operational Research, Elsevier, vol. 284(2), pages 693-711.
    4. Gong, Binlei, 2020. "Multi-dimensional interactions in the oilfield market: A jackknife model averaging approach of spatial productivity analysis," Energy Economics, Elsevier, vol. 86(C).
    5. Glass, Anthony J. & Kenjegalieva, Karligash, 2019. "A spatial productivity index in the presence of efficiency spillovers: Evidence for U.S. banks, 1992–2015," European Journal of Operational Research, Elsevier, vol. 273(3), pages 1165-1179.
    6. Emir Malikov & Jingfang Zhang & Shunan Zhao & Subal C. Kumbhakar, 2023. "Accounting for Cross-Location Technological Heterogeneity in the Measurement of Operations Efficiency and Productivity," Papers 2302.13430, arXiv.org.

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