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On The Choice Of Functional Forms In The Measurement Of Scale And Scope Economies: Generalized Box-Cox And Composite Cost Functions

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  • Ogunyinka, Ebenezer
  • Featherstone, Allen M.

Abstract

This paper estimates and compares generalized Box-Cox and composite cost functions to identify scale and scope economies. The robustness of the outcomes to different functional specifications was examined. Increasing returns to scale was common for product-specific and the overall measures. Generalized Leontief and composite forms yielded more robust elasticity, scale and scope measures. The generalized Box-Cox model was selected as the appropriate functional form as all the special cases were rejected.

Suggested Citation

  • Ogunyinka, Ebenezer & Featherstone, Allen M., 2003. "On The Choice Of Functional Forms In The Measurement Of Scale And Scope Economies: Generalized Box-Cox And Composite Cost Functions," 2003 Annual Meeting, February 1-5, 2003, Mobile, Alabama 35057, Southern Agricultural Economics Association.
    • Handle: RePEc:ags:saeatm:35057
    DOI: 10.22004/ag.econ.35057
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    References listed on IDEAS

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    1. Pulley, Lawrence B & Humphrey, David B, 1993. "The Role of Fixed Costs and Cost Complementarities in Determining Scope Economies and the Cost of Narrow Banking Proposals," The Journal of Business, University of Chicago Press, vol. 66(3), pages 437-462, July.
    2. Pulley, Lawrence B & Braunstein, Yale M, 1992. "A Composite Cost Function for Multiproduct Firms with an Application to Economies of Scope in Banking," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 221-230, May.
    3. Allen M. Featherstone & Charles B. Moss, 1994. "Measuring Economies of Scale and Scope in Agricultural Banking," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(3), pages 655-661.
    4. James A. Chalfant, 1984. "Comparison of Alternative Functional Forms with Application to Agricultural Input Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 66(2), pages 216-220.
    5. Caves, Douglas W & Christensen, Laurits R & Tretheway, Michael W, 1980. "Flexible Cost Functions for Multiproduct Firms," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 477-481, August.
    6. Berndt, Ernst R & Khaled, Mohammed S, 1979. "Parametric Productivity Measurement and Choice among Flexible Functional Forms," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1220-1245, December.
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    8. M. Khaled & M. B. Adams & M. Pickford, 2001. "Estimates of Scale and Scope Economies in the New Zealand Life Insurance Industry," Manchester School, University of Manchester, vol. 69(3), pages 327-349, June.
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