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Estimates of the Returns to Scale for US Manufacturing

  • Altug, S.
  • Filiztekin, A.

This paper derives estimates of the degree of the returns to scale for 2-digit US manufacturing industries using the cost-based primal and dual equations implied by firms' cost-minimization problem. The purpose is to reconcile the cyclical behavior of the primal and dual productivity residuals by allowing for increasing returns and imperfect competition. We find significant differences in estimates fomr the primal and dual equations, the latter implying the presence of a larger degree of the returns to scale, especially for non-durable goods industries.

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Paper provided by Koc University in its series Papers with number 1997/24.

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Length: 27 pages
Date of creation: 1997
Date of revision:
Handle: RePEc:fth:kocuni:1997/24
Contact details of provider: Postal:
Koc University. Intinye 80860. Istanbul Turkey

Phone: (90+212)-338-1302
Fax: (90+212)-338-1393
Web page: http://case.ku.edu.tr/tr/econ/home
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  1. Basu, Susanto & Fernald, John G, 1997. "Returns to Scale in U.S. Production: Estimates and Implications," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 249-83, April.
  2. Susanto Basu & John G. Fernald, 1995. "Aggregate productivity and the productivity of aggregates," International Finance Discussion Papers 532, Board of Governors of the Federal Reserve System (U.S.).
  3. Basu, S. & Fernald, J.G., 1993. "Are Apparent Productive Spillovers a Figment of Specification Error," Papers 93-22, Michigan - Center for Research on Economic & Social Theory.
  4. Dennis W. Carlton, 1987. "The Theory and the Facts of How Markets Clear: Is Industrial Organization Valuable for Understanding Macroeconomics?," NBER Working Papers 2178, National Bureau of Economic Research, Inc.
  5. Marzio Galeotti & Fabio Schiantarelli, 1991. "Variable Markups in a Model with Adjustment Costs: Econometric Evidence for U.S. Industry," Papers 0016, Boston University - Industry Studies Programme.
  6. Matthew D. Shapiro, 1987. "Are Cyclical Fluctuations in Productivity Due More to Supply Shocks or Demand Shocks?," Cowles Foundation Discussion Papers 822, Cowles Foundation for Research in Economics, Yale University.
  7. Robert S. Chirinko & Steven Fazzari, 1993. "Economic fluctuations, market power, and returns to scale: evidence from firm-level data," Research Working Paper 93-06, Federal Reserve Bank of Kansas City.
  8. repec:fth:harver:1487 is not listed on IDEAS
  9. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 1993. "Labor Hoarding and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 245-73, April.
  10. Catherine J. Morrison, 1985. "Productivity Measurement with Nonstatic Expectations and Varying Capacity Utilization: An Integrated Approach," NBER Working Papers 1561, National Bureau of Economic Research, Inc.
  11. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22.
  12. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1995. "Capital utilization and returns to scale," Working Paper Series, Macroeconomic Issues 95-5, Federal Reserve Bank of Chicago.
  13. Morrison, C J, 1994. "The Cyclical Nature of Markups in Canadian Manufacturing: A Production Theory Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 9(3), pages 269-82, July-Sept.
  14. Roeger, Werner, 1995. "Can Imperfect Competition Explain the Difference between Primal and Dual Productivity Measures? Estimates for U.S. Manufacturing," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 316-30, April.
  15. Stephanie Schmitt-Grohe, 1995. "Comparing four models of aggregate fluctuations due to self-fulfilling expectations," Finance and Economics Discussion Series 95-17, Board of Governors of the Federal Reserve System (U.S.).
  16. Hulten, Charles R., 1986. "Productivity change, capacity utilization, and the sources of efficiency growth," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 31-50.
  17. Roberto Perli, . "Indeterminacy, Home Production, and the Business Cycle: a Calibrated Analysis," CARESS Working Papres 97-4, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  18. Burnside, Craig, 1996. "Production function regressions, returns to scale, and externalities," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 177-201, April.
  19. Chirinko, Robert S., 1995. "Nonconvexities, labor hoarding, technology shocks, and procyclical productivity a structural econometric analysis," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 61-98.
  20. Julio J. Rotemberg & Michael Woodford, 1993. "Dynamic General Equilibrium Models with Imperfectly Competitive Product Markets," NBER Working Papers 4502, National Bureau of Economic Research, Inc.
  21. Catherine J. Morrison, 1989. "Unraveling the Productivity Growth Slowdown in the U.S., Canada and Japan: The Effects of Subequilibrium, Scale Economies and Markup," NBER Working Papers 2993, National Bureau of Economic Research, Inc.
  22. Domowitz, Ian & Hubbard, R Glenn & Petersen, Bruce C, 1988. "Market Structure and Cyclical Fluctuations in U.S. Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 55-66, February.
  23. Roger E.A. Farmer & Jang Ting Guo, 1992. "Real Business Cycles and the Animal Spirits Hypothesis," UCLA Economics Working Papers 680, UCLA Department of Economics.
  24. Julio J. Rotemberg & Lawrence H. Summers, 1990. "Inflexible Prices and Procyclical Productivity," The Quarterly Journal of Economics, Oxford University Press, vol. 105(4), pages 851-874.
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