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Retornos à escala e mercado competitivo: teoria e evidências empíricas

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  • Alves, Eliseu Roberto de Andrade

Abstract

The paper develops the concept of return to scale at an elementary level, but rigorously. It is argued that constant and increasing returns are incompatible with competitive markets, because they imply the convergence to few firms, and this is not the case for the real world. The main point is that average cost curve has the shape of a U, and, without restrictions, the firms converge to the branch of decreasing returns. If on the real world is detected increasing or constant returns, it suggests that it should be looked for the market imperfection that are the base of them. And results of increasing or constant returns of econometric models must be taken as a sign of market imperfections. Yet the knowledge of the market imperfections is crucial to design economic policies for economic development with equal opportunities for all. The pattern of six crops showed that the supply is largely in the hands of few farmers, and the great majority of them contribute with a small share of the production. This pattern is clearer for modern crops, as it is the case of soybeans. The results of an econometric model for two groups of small farmers-one with nonnegative profit and the other with negative profit, pointed out increasing returns for the poorer group, and that it was not able to expand production to the cost curve branch of decreasing returns in consequence of market failures.

Suggested Citation

  • Alves, Eliseu Roberto de Andrade, 2004. "Retornos à escala e mercado competitivo: teoria e evidências empíricas," Revista de Economia e Agronegocio / Brazilian Review of Economics and Agribusiness, Federal University of Vicosa, Department of Agricultural Economics, vol. 2(3).
  • Handle: RePEc:ags:rdeeag:56784
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