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External scale economies in manufacturing sector of Pakistan: a comparison of large scale manufacturing sector of Sindh and Punjab


  • Zafar, Sohail
  • Ahmed, Vaqar


This study investigates the external economies of scale in the manufacturing sector of Pakistan. The Return to scale is a property of the production function that indicates the relationship between proportionate change, in all inputs and resulting change in output. Returns to scale are applicable only in the long run, since all inputs are being changed. The estimated value of the coefficient of returns to scale at aggregate level is 1.017. It means that one percentage point change in all input quantities results in 1.017 percent change in output. It turns out that manufacturing sector of Pakistan is characterized by almost constant returns to scale at aggregates and disaggregate level.

Suggested Citation

  • Zafar, Sohail & Ahmed, Vaqar, 2009. "External scale economies in manufacturing sector of Pakistan: a comparison of large scale manufacturing sector of Sindh and Punjab," MPRA Paper 17665, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:17665

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    References listed on IDEAS

    1. Noulas, Athanasios G & Ray, Subhash C & Miller, Stephen M, 1990. "Returns to Scale and Input Substitution for Large U.S. Banks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(1), pages 94-108, February.
    2. Gilligan, Thomas & Smirlock, Michael & Marshall, William, 1984. "Scale and scope economies in the multi-product banking firm," Journal of Monetary Economics, Elsevier, vol. 13(3), pages 393-405, May.
    3. Dilek Karaomerlioglu, 1999. "Does Microelectronics Reduce Economies of Scale? A Case Study in the Turkish Chemical Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 14(3), pages 219-238, May.
    4. Benston, George J & Hanweck, Gerald A & Humphrey, David B, 1982. "Scale Economies in Banking: A Restructuring and Reassessment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 14(4), pages 435-456, November.
    5. Sohail J. Malik & Mohammad Mushtaq & Hina Nazli, 1989. "An Analysis of Production Relations in the Large-scale Textile Manufacturing Sector of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 28(1), pages 27-42.
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    More about this item


    Economies of Scale; Distortion; Efficiency; Pakistan;

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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