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Returns to Scale and Externalities in the Consumption and Investment Sectors

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  • Sharon G. Harrison

    (Barnard College, Columbia University)

Abstract

Using data on US manufacturing, I estimate internal returns to scale and external effects for the consumption and investment sectors. I construct panels of data at the industry level and use results of gross output production function estimation to derive implied estimates in a value added specification. For the investment sector, returns to scale appear to be slightly increasing, with evidence of a positive external effect. For consumption, the evidence indicates decreasing to constant returns to scale. I discuss the implications of these results for the empirical plausibility of indeterminacy in recent multi-sector models of the business cycle. (Copyright: Elsevier)

Suggested Citation

  • Sharon G. Harrison, 2003. "Returns to Scale and Externalities in the Consumption and Investment Sectors," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(4), pages 963-976, October.
    • Handle: RePEc:red:issued:v:6:y:2003:i:4:p:963-976
    DOI: 10.1016/S1094-2025(03)00034-6
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    References listed on IDEAS

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    More about this item

    Keywords

    Production function; Sector-specific externalities; Increasing returns to scale;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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