Returns to Scale in U.S. Production: Estimates and Implications
AbstractA typical two-digit industry in the United States appears to have approximately constant returns to scale. Three puzzles emerge, however. First, estimates rise at higher levels of aggregation. Second, apparent decreasing returns contradicts evidence of small economic profits. Third, estimates with value added differ substantially from those with gross output. A representative-firm paradigm cannot explain these puzzles but a simple story of aggregation over heterogeneous units can. The authors discuss implications of heterogeneity for calibrating one-sector macroeconomic models, showing that these models sometimes require firm-level parameters but at other times require the 'biased' aggregate parameters. Copyright 1997 by the University of Chicago.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Political Economy.
Volume (Year): 105 (1997)
Issue (Month): 2 (April)
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Web page: http://www.journals.uchicago.edu/JPE/
Other versions of this item:
- Susanto Basu & John G. Fernald, 1996. "Returns to scale in U.S. production: estimates and implications," International Finance Discussion Papers 546, Board of Governors of the Federal Reserve System (U.S.).
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Declining Labor Shares and Rising Corporate Profits
by ozidar in owenzidar on 2013-06-09 21:32:05
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