Returns to scale with a Cobb-Douglas production function for a small italian mechanical firm

Osti, Davide (2021): Returns to scale with a Cobb-Douglas production function for a small italian mechanical firm.

Abstract

with this piece of evidence, I try to she light upon the e ects of  xed and variable costs on revenues for a  rm operating in the sector of leathing and milling in the neighbourhood of Bologna, on the Tus- can - Emilian Appennines, through the estimation of a linear bivariate simultaneous equation model where variable and  xed costs explain revenues; with a sample of eleven years of annual data, I  nd that a marginal increase in variable costs of 1 euro, keeping the  xed costs constants, leads to higher revenues up to 1.155 euro; I further estimate a cobb douglas production function, in order to  nd out whether the returns to scale are increasing, constant or decreasing; I  nd support for the hypothesis of slightly increasing returns to scale with the base- line cobb douglas transformed in logarithms (with capital and labour only), while multiplicatively including an additional regressor for raw materials purchases, I  nd evidence for slightly decreasing returns to scale

• Item Type: MPRA Paper
• Language: English
• Keywords: rm behaviour, production functions, returns to scale, cobb douglas, stochastic frontier model, non linear least squares, production sets, convex cones
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; D - Microeconomics > D2 - Production and Organizations > D22 - Firm Behavior: Empirical Analysis; D - Microeconomics > D2 - Production and Organizations > D24 - Production ; Cost ; Capital ; Capital, Total Factor, and Multifactor Productivity ; Capacity; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L23 - Organization of Production; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification, and Scope; L - Industrial Organization > L6 - Industry Studies: Manufacturing > L62 - Automobiles ; Other Transportation Equipment ; Related Parts and Equipment

References

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