IDEAS home Printed from https://ideas.repec.org/p/hhs/nierwp/0091.html
   My bibliography  Save this paper

Is Rising Returns to Scale a Figment of Poor Data?

Author

Listed:
  • Hansen, Sten

    (Ministry of Finance, SE-103 33 Stockholm, Sweden)

  • Lindström, Tomas

    (National Institute of Economic Research)

Abstract

While using detailed firm-level data from the private business sector, this study identifies two empirical puzzles: (i) returns-to-scale (RTS) parameter estimates rise at higher levels of data aggregation, and (ii) estimates from the firm level suggest decreasing returns to scale. The analysis shows that, although consistent with rising estimates, the Basu-Fernald (1997) aggregation-bias effect does not drive this result. Rather, rising and too low returns-to-scale estimates probably reflect a mixture of random errors in factor inputs. It turns out, in fact, that a 7.5-10 percent error in labor (hours worked) can explain both puzzles.

Suggested Citation

  • Hansen, Sten & Lindström, Tomas, 2004. "Is Rising Returns to Scale a Figment of Poor Data?," Working Papers 91, National Institute of Economic Research.
    • Handle: RePEc:hhs:nierwp:0091
    as

    Download full text from publisher

    File URL: http://www.konj.se/download/18.4ee9b512150ed5e093b906fc/1447246075199/Working-Paper-91-Is-Rising-Returns-to-Scale-a-Figment-of-Poor-Data-.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Sala-i-Martin, Xavier X, 1996. "A Positive Theory of Social Security," Journal of Economic Growth, Springer, vol. 1(2), pages 277-304, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Maebayashi, Noritaka, 2018. "Is an unfunded social security system good or bad for growth? A theoretical analysis of social security systems financed by VAT," MPRA Paper 90881, University Library of Munich, Germany.
    2. van Groezen, B.J.A.M. & Meijdam, A.C. & Verbon, H.A.A., 2002. "Social Security Reform and Population Ageing in a Two-Sector Growth Model," Other publications TiSEM 5109f2fc-ba3b-421c-89ab-9, Tilburg University, School of Economics and Management.
    3. Olivier Charlot, 2005. "Éducation, emploi et participation au marché du travail dans un modèle d'appariement," Recherches économiques de Louvain, De Boeck Université, vol. 71(1), pages 35-66.
    4. Kaganovich, Michael & Zilcha, Itzhak, 1999. "Education, social security, and growth," Journal of Public Economics, Elsevier, vol. 71(2), pages 289-309, February.
    5. Gilles Le Garrec & Stéphane Lhuissier, 2011. "Life expectancy, heavy work and the return to education: lessons for the social security reform," SciencePo Working papers Main hal-01069511, HAL.
    6. repec:fgv:epgrbe:v:66:n:4:a:5 is not listed on IDEAS
    7. Giorgio Bellettini & Carlotta Berti Ceroni, 1999. "Is Social Security Really Bad for Growth?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 796-819, October.
    8. Peter Lindert, 2003. "Why The Welfare State Looks Like a Free Lunch," Working Papers 59, University of California, Davis, Department of Economics.
    9. Günther Rehme, 2007. "Economic Growth and (Re-)Distributive Policies in a Non-cooperative World," Journal of Economics, Springer, vol. 91(1), pages 1-40, May.
    10. Hostenkamp, Gisela & Stolpe, Michael, 2008. "Optimal health and retirement policies amid population aging," Kiel Working Papers 1428, Kiel Institute for the World Economy (IfW Kiel).
    11. Günther Rehme, 2011. "Endogenous Policy And Cross‐Country Growth Empirics," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(2), pages 262-296, May.
    12. De Fraja, Gianni, 2008. "Market and public provision in the presence of human capital externalities," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 962-985, June.
    13. Bréchet, Thierry & Jouvet, Pierre-André & Rotillon, Gilles, 2013. "Tradable pollution permits in dynamic general equilibrium: Can optimality and acceptability be reconciled?," Ecological Economics, Elsevier, vol. 91(C), pages 89-97.
    14. Daniel T. Haile, 2005. "Wealth Distribution, Lobbying and Economic Growth: Theory and Evidence," WIDER Working Paper Series RP2005-21, World Institute for Development Economic Research (UNU-WIDER).
    15. Jose Herce & Simon Sosvilla-Rivero & Juan Jose de Lucio, 2000. "Social protection benefits and growth: evidence from the European Union," Applied Economics Letters, Taylor & Francis Journals, vol. 7(4), pages 255-258.
    16. Gilles Le Garrec, 2012. "Social security and growth in an aging economy : the case of acturial fairness," Sciences Po publications 2012-18, Sciences Po.
    17. Gilles Le Garrec & Vincent Touzé, 2015. "Stagnation séculaire et accumulation de capital," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(6), pages 307-337.
    18. Rehme, Günther, 2014. "Endogenous (re-)distributive policies and economic growth: A comparative static analysis," Economic Modelling, Elsevier, vol. 40(C), pages 355-366.
    19. Pedro Cavalcanti Ferreira & Marcelo Rodrigues dos Santos, 2013. "The Effect of Social Security, Health, Demography and Technology on Retirement," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 350-370, April.
    20. Rehme, Gunther, 2006. "Redistribution and economic growth in integrated economies," Journal of Macroeconomics, Elsevier, vol. 28(2), pages 392-408, June.
    21. Miyazaki, Koichi, 2014. "Optimal pay-as-you-go social security when retirement is endogenous and labor productivity depreciates," MPRA Paper 61166, University Library of Munich, Germany.

    More about this item

    Keywords

    Business cycles; Data aggregation; External economies; Factor hoarding; Firm-level data; Monte Carlo simulation; Random errors; Returns to scale;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:nierwp:0091. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Hegardt Grant (email available below). General contact details of provider: https://edirc.repec.org/data/kongvse.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.