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Heterogeneity in Returns to Scale: A Random Coefficient Analysis with Unbalanced Panel Data

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Author Info
Erik Biørn, Kjersti-Gro Lindquist and Terje Skjerpen () (Statistics Norway)

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Abstract

This paper analyses the importance of scale economies by means of unbalanced plant-level panel data from three Norwegian manufacturing industries. Focus is on heterogeneous technologies, and unlike most previous work on micro data, the model description includes heterogeneity in both the scale properties (the slope coefficients) and the intercept term, represented by random coefficients in the production function. Three (nested) functional forms are investigated: the Translog, an extended Cobb-Douglas, and the strict Cobb-Douglas. Although constant or weakly increasing returns to scale is found for the average plant, the results reveal considerable variation across plants. Variations in both input and scale elasticities are to a larger extent due to randomness of the production function parameters than to systematic differences in the input mix.

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Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 292.

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Date of creation: Dec 2000
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Handle: RePEc:ssb:dispap:292

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Related research
Keywords: Panel Data. Economies of Scale. Heterogeneity. Random Coefficients;

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
L61 - Industrial Organization - - Industry Studies: Manufacturing - - - Metals and Metal Products; Cement; Glass; Ceramics
L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
L73 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Forest Products

References listed on IDEAS
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  1. Hsiao, Cheng, 1975. "Some Estimation Methods for a Random Coefficient Model," Econometrica, Econometric Society, vol. 43(2), pages 305-25, March. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Biørn, Erik & Skjerpen, Terje & Wangen, Knut Reidar, 2004. "Can Random Coefficient Cobb-Douglas Production Functions Be Aggregated to Similar Macro Functions?," Memorandum 22/2004, Oslo University, Department of Economics. [Downloadable!]
  2. Biorn, Erik & Hagen, Terje P & Iversen, Tor & Magnussen, Jon, 2006. "Heterogeneity in Hospitals' Responses to a Financial Reform: A Random Coefficient Analysis of The Impact of Activity-Based Financing on Efficiency," MPRA Paper 8100, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  3. Erik Biørn, Terje Skjerpen and Knut Reidar Wangen, 2003. "Parametric Aggregation of Random Coefficient Cobb-Douglas Production Functions: Evidence from Manufacturing Industries," Discussion Papers 342, Research Department of Statistics Norway. [Downloadable!]
  4. Kjersti-Gro Lindquist, 2002. "The Effect of New Technology in Payment Services on Banks' Intermediation," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B3-2, International Conferences on Panel Data. [Downloadable!]
  5. Yuriy Gorodnichenko, 2007. "Using Firm Optimization to Evaluate and Estimate Returns to Scale," NBER Working Papers 13666, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Hailu, Getu & Goddard, Ellen & Jeffrey, Scott, 2005. "Measuring Efficiency in Fruit and Vegetable Marketing Co-operatives with Heterogeneous Technologies in Canada," 2005 Annual meeting, July 24-27, Providence, RI 19507, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  7. Erik Biørn and Terje Skjerpen, 2002. "Aggregation and Aggregation Biases in Production Functions: A Panel Data Analysis of Translog Models," Discussion Papers 317, Research Department of Statistics Norway. [Downloadable!]
Statistics
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This page was last updated on 2009-11-13.

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