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On directional scale elasticities

Author

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  • Bert Balk
  • Rolf Färe
  • Giannis Karagiannis

Abstract

In this paper we generalize the concept of scale elasticity to accommodate changes in any direction in the input–output space and not only in the radial input and output directions as was done so far with the conventional scale elasticity measure. Our departure point is that we view the scale elasticity as a directional derivative measure. Then for any functional representation of the technology and at a given point in the input–output space, the scale elasticity can be computed along any direction. By adjusting accordingly the direction vector we can measure appropriately factor returns with technologies exhibiting weak disposability of outputs and/or inputs. In addition, we do not have to restrict the analysis to only equi-proportional changes. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Bert Balk & Rolf Färe & Giannis Karagiannis, 2015. "On directional scale elasticities," Journal of Productivity Analysis, Springer, vol. 43(1), pages 99-104, February.
    • Handle: RePEc:kap:jproda:v:43:y:2015:i:1:p:99-104
    DOI: 10.1007/s11123-014-0399-6
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    Cited by:

    1. Victor V. Podinovski & Ole Bent Olesen & Cláudia S. Sarrico, 2018. "Nonparametric Production Technologies with Multiple Component Processes," Operations Research, INFORMS, vol. 66(1), pages 282-300, January.
    2. Rolf Färe & Giannis Karagiannis, 2023. "Translation efficiency and directionally optimal scale," Journal of Economics, Springer, vol. 140(3), pages 259-273, December.
    3. Victor V. Podinovski & Robert G. Chambers & Kazim Baris Atici & Iryna D. Deineko, 2016. "Marginal Values and Returns to Scale for Nonparametric Production Frontiers," Operations Research, INFORMS, vol. 64(1), pages 236-250, February.
    4. Peixin Duan, 2022. "How large of a grant size is appropriate? Evidence from the National Natural Science Foundation of China," PLOS ONE, Public Library of Science, vol. 17(2), pages 1-14, February.
    5. Podinovski, Victor V., 2019. "Direct estimation of marginal characteristics of nonparametric production frontiers in the presence of undesirable outputs," European Journal of Operational Research, Elsevier, vol. 279(1), pages 258-276.

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    More about this item

    Keywords

    Scale elasticity; Technology; Radial distance function; Hyperbolic distance function; Directional distance function; Cost function; D21; D24;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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