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The Spanish automotive industry: scale economies and input relationships

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  • Lila Truett
  • Dale Truett

Abstract

This paper investigates the existence of economies of scale in the Spanish automobile industry as well as the substitution possibilities between input pairs and the direct and cross price elasticities of demand for the various inputs by estimating a translog cost function for both a three input model involving capital, labour, and intermediate goods as well as a four input model where energy is separated from other intermediate goods. The results of this study are consistent with the hypothesis of economies of scale in the Spanish automobile industry, particularly at the low and mean levels of output. These results also are consistent with the hypothesis that capital is a substitute for the other inputs, but that labour and intermediate goods are complements. Labour and energy also appear to have a complementary relationship over most of the data points in this study. The significance of a complementary relationship between labour and intermediate goods is that any attempt by the Spanish government to restrict imports of these inputs, resulting in higher domestic prices for them, may aggravate an already serious domestic unemployment problem.

Suggested Citation

  • Lila Truett & Dale Truett, 2001. "The Spanish automotive industry: scale economies and input relationships," Applied Economics, Taylor & Francis Journals, vol. 33(12), pages 1503-1513.
    • Handle: RePEc:taf:applec:v:33:y:2001:i:12:p:1503-1513
    DOI: 10.1080/00036840012960
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    Cited by:

    1. Rudholm, Niklas, 2008. "Entry of new pharmacies in the deregulated Norwegian pharmaceuticals market--Consequences for costs and availability," Health Policy, Elsevier, vol. 87(2), pages 258-263, August.
    2. Nursel AYDINER‐AVSAR & ÖZlem ONARAN, 2010. "The Determinants Of Employment: A Sectoral Analysis For Turkey," The Developing Economies, Institute of Developing Economies, vol. 48(2), pages 203-231, June.
    3. Rudholm, Niklas, 2006. "Mergers and Economies of Scale: Volkswagen AG 1976 - 2000," HUI Working Papers 4, HUI Research.

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