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| | Returns to scale - Wikipedia, the free encyclopedia |
 | | Network externalities resemble economies of scale, but they are not considered such because they are a function of the number of users of a good or service in an industry, not of the production efficiency within a business. | | | If costs increase proportionately, there are no economies of scale; if costs increase by a greater amount, there are diseconomies of scale; if costs increase by a lesser amount, there are positive economies of scale. | | | Typically, because there are fixed costs of production, economies of scale are initially increasing, and as volume of production increases, eventually diminishing, which produces the standard U-shaped cost curve of economic theory. |
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http://en.wikipedia.org/wiki/Economies_of_scale
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| | Diminishing returns - Wikipedia, the free encyclopedia |
| | The total return when 2 kg of seed are invested is 1.5/2 = 0.75 t/kg, while the total return when 3 kg are invested is 1.75/3 = 0.58 t/kg. | | | A consequence of diminishing marginal returns is that as total investment increases, the total return on investment as a proportion of the total investment (the average product or return) also decreases. | | | The return from investing the first kilogram is 1 t/kg. |
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http://en.wikipedia.org/wiki/Diminishing_returns
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| | Revista de Economia e Sociologia Rural - Sources of small family farm production inefficiency, recôncavo region, ... |
| | A non-parametric approach, in the context of cost minimizing behavior under constant returns to scale, was used to estimate the indices of technical, scale, allocative, and total (economic or cost) efficiency. | | | In Table 2, the calculated percentages of total, pure technical, scale, and allocative inefficiencies of the inefficient observations are ordered by decreasing percentage of pure technical inefficiency. | | | Considering the sample as a whole, the results indicate that 78.4% of the total inefficiency (economic, or of costs) is due to allocative inefficiency, 12.6% to scale inefficiency, and 9.0% to technical inefficiency. |
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http://www.scielo.br/scielo.php?script=sci_arttext&pid=S0103-20032003000100004&lng=en&nrm=iso&tlng=en
(3078 words)
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| | Returns to Scale |
| | Marshall's presented an assortment of rationales for why firms may face changing returns to scale and the rationales he offered up were sometimes technical (and thus applicable in general), sometimes due to changing prices (thus only applicable to situations of imperfect competition). | | | Specifically, it would not be "rational" for an enterprise to ever produce in such a situation. | | | The advantage of the intensive production function representation is that we can allow for both variations in capital and labor in a single, two-dimensional diagram. |
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http://cepa.newschool.edu/het/essays/product/returns.htm
(5146 words)
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| | New Page 0 |
| | The economy has two sectors: one with increasing returns that are external to the firm and endogenously determined “the knowledge sector” and the other with constant returns to scale. | | | We define a measure of employment volatility, a `labor beta' that is a relative of the `beta' used in finance. | | | A `resolving' equation is derived from which it is proved that increasing return sectors exhibit more employment volatility then other sectors. |
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http://www.columbia.edu/~ocg2001/publications1.htm
(669 words)
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| | International Economics Glossary: R |
| | The return includes interest, dividends, and capital gains and losses, the latter due to both changes in the price of the asset and, for international holdings, changes in exchange rates. | | | The higher expected return (in the sense of mathematical expected value) that an uncertain asset must pay in order for risk averse investors to be willing to hold it. | | | The amount that is earned by someone who holds an asset, usually expressed as a percentage of what it cost to acquire the asset. |
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http://www-personal.umich.edu/~alandear/glossary/r.html
(2775 words)
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| | Econ 310 |
| | Decreasing returns to scale occur when TP is rising at a decreasing rate (or is actually declining), and MP is declining. | | | Increasing returns to scale means that the total product (TP) curve is rising at an increasing rate, and that marginal product (MP) is rising. | | | Hint: its easiest to see when marginal factor cost (e.g., hourly labor cost) is fixed, and so marginal cost is inversely related to marginal product. |
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http://www.humboldt.edu/~microeco/cost.htm
(2427 words)
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| | SRPPT91 |
| | For a U-shaped cost curve displaying eventually decreasing returns, the same argument establishes that there will be a positive supply response whenever the initial optimum is in the region of the curve characterised by declining or flat average costs; that is, whenever output is at or below the point at which average costs are minimized. | | | Under constant returns to scale, for any realization of the random price variable p, profit is linear in output a. | | | In their recent survey of the theory of the firm under uncertainty, Robison and Barry use a mean-variance approximation to the expected utility (EU) model to examine this question and conclude that the impact of a proportional profits tax is ambiguous, except in the restrictive special case of constant absolute risk aversion. |
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http://www.uq.edu.au/economics/johnquiggin/JournalArticles91/SRPPT91.html
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| | long run costs of production |
| | The LRAC will tend to fall steeply when the overhead costs of production are high and the marginal costs of producing extra output are low – the classic examples of industries where this occurs are in markets such as steel production, motor car manufacturing, pharmaceuticals and computer software. | | | In the example shown when the business increases the scale of production from Plant 1 (with 10 units of labour and 10 units of capital) to Plant 2 (a doubling of the inputs used), total output quadruples. | | | For example, in industries where massive networks or national distribution channels are required, the overhead costs relative to the running costs are likely to be high. |
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http://www.tutor2u.net/economics/content/topics/buseconomics/longrun_costs.htm
(816 words)
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| | Returns to scale in producing human capital from schooling -- Trostel 56 (3): 461 -- Oxford Economic Papers |
| | returns to investments that perpetually exceed their costs. | | | Harmon, C., Oosterbeek, H., and Walker, I. The Return to Education: A Review of Evidence, Issues and Deficiencies in the Literature, Centre for the Economics of Education, London. | | | Acemoglu, D. ‘A microfoundation for social increasing returns in human capital accumulation’, Quarterly Journal of Economics, 111, 779–804. |
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http://oep.oupjournals.org/cgi/content/full/56/3/461?ijkey=60RG10wzROAEI&keytype=ref
(4330 words)
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| | Internal Economies of scale [ Biz/ed Virtual Developing Country ] |
| | As firms become larger and their scale of operations increase they are able to experience reductions in their average costs of production. | | | These are cost reductions accruing to the firm as a result of the growth of the firm itself. | | | The long run average cost curve therefore starts to curve upwards. |
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http://www.bized.ac.uk/virtual/dc/farming/theory/th8.htm
(452 words)
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| | Economies of Scale and Returns to Scale |
| | Another way to characterize economies of scale is with a decreasing average cost curve. | | | Fixed costs are those costs that must be incurred even if production were to drop to zero. | | | Average costs, AC, are calculated as the total costs to produce output Q, TC(Q), divided by total output. |
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http://internationalecon.com/v1.0/ch80/80c020.html
(446 words)
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| | Egwald Economics - Production Functions: Cobb-Douglas Production Function |
| | Now we see that both average cost and marginal cost are decreasing, with marginal cost below average cost, a consequence of increasing returns to scale. | | | From the graphs, we see that both average cost and marginal cost are increasing, and marginal cost is greater than average cost. | | | Suppose our firm is to operate efficiently (using the cost minimizing combination of inputs) producing product in the 25 - 35 unit range (using the decreasing returns Cobb Douglas production function). |
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http://www.egwald.com/economics/productionfunctions.php
(1276 words)
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| | Increasing vs. Diminishing Returns (Alertbox Sidebar) |
| | Assuming that a manager is good at picking the most promising business opportunities to do first, it would seem that diminishing returns are a fundamental law of doing business: the first few deals skim the cream and subsequent ones have progressively less value. | | | In software and other industries governed by increasing returns, getting 100% bigger may generate, say, 150% more value. | | | In traditional industries, diminishing returns set in, so getting 100% bigger may only generate, say, 90% more value. |
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http://www.useit.com/alertbox/increasingreturns.html
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| | FRBB Working Papers: Productivity and Economies of Scale in the Production of Bank Service Value Added |
| | If confirmed, this tentative conclusion implies that the cost savings from increased scale of banking institutions should be taken into account in the analysis of mergers and antitrust policy. | | | This paper uses a new measure of bank service output to estimate various specifications of production and cost functions for Bank Holding Companies (BHCs) over the period 1986 to 1999. | | | This implies that one potential benefit of bank mergers is the acquisition by more productive banks of less productive banks, thereby improving the targets’ productivity. |
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http://www.bos.frb.org/economic/wp/wp2003/wp037.htm
(303 words)
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| | SSRN-Evidence on the Winner-takes-all Business Model: The Profitability Returns-to-scale of Expenditures on Intangibles ... |
| | That is, larger expenditures should be more profitable per dollar of investment than small expenditures because larger expenditures are more likely to be either the cause or the consequence of the firm holding a dominant market position. | | | First, of the fifteen NPVs that I compute (five levels of spending for each of three intangibles), only that of the very largest level of expenditures on brand is reliably positive. | | | I test this prediction by estimating the average ex-post net present value (NPV) profitability of expenditures made by U.S. Internet firms on brand, R&D and structural intangibles over the period 1995q1-2001q2 as a function of the scale of the expenditures. |
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http://papers.ssrn.com/sol3/papers.cfm?abstract_id=292099
(366 words)
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| | Aggregate Returns to Scale: Why Measurement Is Imprecise - Cole, Ohanian (ResearchIndex) |
| | However, prior attempts to measure the extent of these returns using instrumental variable techniques have yielded quite imprecise estimates. | | | "Aggregate Returns to Scale: Why Measurement Is Imprecise," Federal Reserve Bank of Minneapolis, Quarterly Review, Summer, 19-28. | | | Aggregate Returns to Scale: Why Measurement Is Imprecise, Federal Reserve Bank of Minneapolis, Quarterly Review, Summer, 19-28.", year = "1999", url = "citeseer.ist.psu.edu/cole99aggregate.html" } |
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http://citeseer.ist.psu.edu/433494.html
(355 words)
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| | Glossary of research economics |
| | Defined by the sum of the value of imports of goods and services plus net returns on investments abroad, minus the value of exports of goods and services, where all these elements are measured in the domestic currency. | | | According to Andersen and Bollerslev 1995/6/7, "ARCH models are usually estimated by maximum likelihood techniques." They almost always give a leptokurtic distrbution of asset returns even if one assumes that each period's returns are normal, because the variance is not the same each period. | | | AGI: An abbreviation for Adjusted Gross Income, a line item which appears on the U.S. taxpayer's tax return and is sometimes used as a measure of income which is consistent across taxpayers. |
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http://www.econterms.com/econtent.html
(14590 words)
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| | OCC: PUBLICATIONS |
| | Preferences over production plans are not invariant with respect to the tax rate on profits or on fixed revenues. | | | We develop a maximization model that allows for (but does not impose) preferences of bank management that are not risk neutral. | | | Recovering Technologies That Account for Generalized Managerial Preferences: An Application to Banks That Are Not Risk-Neutral |
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http://www.occ.treas.gov/wp97-11.htm
(562 words)
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| | gtk.Scale |
| | () method returns the value of the "draw-value" property. | | | () method returns the value of the "value-pos" property. | | | () method returns the value of the "digits" property that indicates the number of decimal places that are displayed in the value. |
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http://www.pygtk.org/pygtk2reference/class-gtkscale.html
(394 words)
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| | Increasing Returns for Websites (Alertbox) |
| | Also, most of the cost of running a website is independent of the number of users: content creation is an up-front investment that is independent of usage for traditional content, even though the cost of other material such as moderated discussion groups does grow with usage. | | | Since the Web sits in the overlap between software and the real world, should we expect it to have increasing or decreasing returns? | | | Server and ISP costs do grow by usage, though usually more slowly than the number of users since there is some economy of scale in running a larger operation. |
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http://www.useit.com/alertbox/9704b.html
(1123 words)
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| | Scale PALERMO TECHNICAL IMPACT HAZARD SCALE ... Palermo ... |
| | Bid on auctions or use Buy it Now to purchase thousands of items from customer-rated merchants. | | | We also guarantee the internets lowest prices on all items listed. | | | We guarantee the lowest prices on all items listed. |
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http://scale.phpbbscript.com
(764 words)
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| | Dr. T's EconLinks.com: Glossary: Decreasing Returns to Scale |
| | A firm faces decreasing returns to scale when output increases at a lower rate than inputs when the firm expands (but the ratio of capital to labor is held fixed in the process). | | | Check the Stock Evaluation page to get a second opinion now! |
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http://www.econlinks.com/glossary/decreasing_returns_to_scale.php
(82 words)
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| | [No title] |
| | Labor Mobility and a Dual Economy: A Case of External Economies of Scale and Unemployment | | | Free Trade versus Free Labor Mobility with Increasing Returns and Unemployment | | | International Labor Mobility: Unemployment and Increasing Returns to Scale. |
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http://www.nyt-om-arbejdsliv.dk/2omtale.aspx?itemID=657
(106 words)
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| | Returns to Scale in the Life Insurance Industry |
| | Abstract: In this paper the long-run cost curve for the Canadian life insurance industry is estimated with an output measure consisting of a weighted sum of activities. | | | Returns to Scale in the Life Insurance Industry | | | It is shown that previous studies of returns to scale in life insurance used biased proxies for output which led to exaggerated estimates of the degree of returns to scale. |
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http://www.rje.org/abstracts/abstracts/1977/Autumn_1977._pp._497_514.html
(104 words)
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| | Returns to Scale |
| | A popular exam question: Can you have diminishing returns to labour and constant returns to scale. | | | Returns to scale are long-run concept since both inputs are changing. | | | Don’t confuse decreasing returns to scale (a long-run concept) with diminishing returns (a short-run concept). |
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http://www.carleton.ca/vpac/110398/tsld006.htm
(42 words)
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| | Returns to Scale |
| | In introductory economics, we usually discuss these long run tendencies in the context of cost analysis, rather than marginal productivity analysis. | | | Example: If we increase the number of machinists and machine tools each by 50%, and the number of standard pieces produced increases also by 50%, then we have constant returns in machinery production. | | | Example: If we increase the inputs to a software engineering firm by 50% output and increases by 60%, we have increasing returns to scale in software engineering. |
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http://william-king.www.drexel.edu/top/Prin/txt/MPCh/RtoS1.html
(417 words)
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| | EconPapers: original papers: Returns to scale in one-shot information processing when hours count |
| | Keywords: Organizations; returns to scale; wage costs; parallel processing (search for similar items in EconPapers) | | | We find constant returns to scale over a wide range of delay costs, whereas Radner found increasing returns to scale: In other words, costs rise proportionally with the size of the firm's information problem. | | | Constant returns to scale implies that distortions in firm size will not arise from the need for hierarchical organization per se, but rather from organizational issues from the theory of the firm, such as incentives and abilities. |
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http://econpapers.repec.org/article/sprreecde/v_3A6_3Ay_3A2001_3Ai_3A1_3Ap_3A113-124.htm
(384 words)
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| | Dissertation Titles and Publications by Calendar Year 1988 Doctoral Degree Alumni of the Department of Economics at ... |
| | Fukuyama, Hirofumi, "Returns to Scale and Efficiency of Credit Associations in Japan: A Nonparametric Frontier Approach," Japan and the World Economy, September 1996, 8(3), 259-277. | | | Alternative Notions and Measures of Returns to Scale: A Multiple-Output Duality Approach, Ph.D. dissertation, 1988 | | | Fukuyama, Hirofumi, "Technical and Scale Efficiency of Japanese Commercial Banks: A Non-Parametric Approach," Applied Economics, August 1993, 25(8), 1101-1112. |
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http://www.siu.edu/~econ/gradpubs_1988.html
(1007 words)
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| | S-WoPEc: Is Rising Returns to Scale a Figment of Poor Data? |
| | Abstract: While using detailed firm-level data from the private business sector, this study identifies two empirical puzzles: (i) returns-to-scale (RTS) parameter estimates rise at higher levels of data aggregation, and (ii) estimates from the firm level suggest decreasing returns to scale. | | | Report problems with accessing this service to Sune Karlsson () or Helena Lundin (). | | | The analysis shows that, although consistent with rising estimates, the Basu-Fernald (1997) aggregation-bias effect does not drive this result. |
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http://swopec.hhs.se/nierwp/abs/nierwp0091.htm
(216 words)
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| | Production Function |
| | On the other hand, if an industry has decreasing returns to scale, a merger of two small firms to create a large firm will cut output, raise average costs, and lower profits. | | | The law of diminishing returns was a central piece of economic theory in the 19th century and accounted for economists' gloomy expectations of the future. | | | The first unit of labor increases production by 13, and as more labor is added, the increases in production gradually fall. |
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http://ingrimayne.saintjoe.edu/econ/TheFirm/ProductionFunct.html
(1167 words)
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| | Returns to scale |
| | Returns to scale tells us how the output changes as all inputs change by the same factor; the marginal product concerns how output changes as one input changes, holding all other inputs fixed. | | | In particular, a production function can have increasing returns to scale even though the marginal product of every input decreases as more of that input is used. | | | Note that there is no direct connection between returns to scale (increasing, constant, decreasing) and the rate change of the marginal product of an input! |
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http://www.chass.utoronto.ca/~osborne/2x3/tutorial/RTS.HTM
(242 words)
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| | Substitution |
| | However, many businesses have increasing returns at normal levels of output. | | | In theory, if you double all inputs in a production process, you should be able to double the output. | | | Now, suppose we double the level of inputs, and ask whether or not we get 2x units of output. |
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http://arnoldkling.com/econ/substitution.html
(1227 words)
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| | Estimating Returns to Scale with Large, Imperfect Panels: An Application to Chilean Manufacturing Industries |
| | Although general expansion of the manufacturing sector cannot be expected to yield strong plant-level scale economies, our results do not rule out scale economies from other sources, such as the spreading of start-up costs and external returns to scale. | | | An analysis of the results suggests that estimates based on generalized method of moments (GMM) estimators that pool long differences (which eliminate heterogeneity effects) are robust to measurement error in the capital stock, heteroscedasticity, and selectivity. | | | Finally, the analysis has generated several findings of methodological interest, including the notion that Stigler's survival test may indeed be useful as a quick first pass on the empirical importance of returns to scale. |
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http://www.worldbank.org/research/journals/wber/revjan93/estimate.htm
(309 words)
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| | [No title] |
| | Increasing returns to scale means that output will be more than doubled. | | | Assume our production function is described by: EMBED Equation.3 This production function means that if we take 100 units of capital and 100 units of labor, the output is (100)1/2 * (100)1/2 = 100. | | | Conversely, if we have decreasing returns to scale, doubling the level of inputs yields less output than if we had used the old level of inputs and simply produced things twice. |
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http://www.unc.edu/~woolleym/RTS.doc
(927 words)
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| | [No title] |
| | Now we will look at a few production functions and see if we have increasing, decreasing, or constant returns to scale. | | | Although there are other ways for determining whether or not a production function is increasing returns to scale, decreasing returns to scale, or constant returns to scale, this way is the fastest and easiest. | | | Our new production has increased by less than m, so we have decreasing returns to scale. |
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http://www.forexnet.lv/EditModule.aspx?tabid=579&mid=1015&def=News%20Article%20View&ItemId=86
(467 words)
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| | SAS/ETS Examples -- Testing for Returns to Scale in a Cobb-Douglas Production Function |
| | For example, suppose both the capital and the labor inputs are doubled. | | | For increasing returns, if both capital and labor are increased by a factor of n, then output increases by an amount greater than n. | | | You are interested in determining whether the function exhibits constant returns to scale and test against the alternative that the returns are not constant. |
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http://support.sas.com/rnd/app/examples/ets/cobbdoug
(1294 words)
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| | Returns to Scale |
| | The long-term relationship between outputs and the amount of inputs required to generate them. | | | Classical economists were preoccupied with the diminishing returns to scale of land, whereas post-Marshallian studies examined increasing returns to scale. | | | If inputs are increased by half, economies of scale occur where a higher proportionate increase in production is achieved. |
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http://www.economyprofessor.com/economictheories/returns-to-scale.php
(117 words)
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| | Production functions |
| | We also note that the 500 represents labor productivity, and if the number increases to 600, it means that labor productivity has increased to 600 pizzas a day. | | | That is, if you double both capital and labor you will double output. | | | However, more realistic production functions must incorporate diminishing returns to labor or to any other single factor of production. |
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http://www.pitt.edu/~mgahagan/Prodfn.htm
(548 words)
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| | Returns to Scale |
| | Returns to Scale are the increases in output that result from increasing all inputs by the same %. | | | Constant Returns to Scale --- the % increase in Q is equal to the % increase in inputs. | | | Increasing Returns to Scale -- the % increase in Q exceeds the % increase in inputs. |
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http://econ.iastate.edu/classes/econ101/merrill/fall97/chap6-10/tsld089.htm
(70 words)
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| | EconPapers: How Large Are Returns to Scale in the U.S.? A View Across the Boundary |
| | The results of this paper therefore suggest that increasing returns to scale are not the source for sunspot fluctuations in U.S. business cycles | | | Based on the methodology developed by Lubik and Schorfheide (2004) I use Bayesian methods to estimate the model over the entire parameter space, allowing for sunspot equilibria generated by increasing returns to scale in production. | | | Moreover, estimates of returns to scale will be biased when the possibility of indeterminacy and sunspot driven fluctuations is not properly accounted for. |
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http://econpapers.repec.org/paper/ecmnasm04/512.htm
(408 words)
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| | Quiz Questions |
| | are cost advantages achieved as a result of large scale operations | | | An increase in the cost of factor inputs: | | | The authors argue that the minimum efficient scale of operations is getting smaller in many industries. |
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http://www.mcgrawhill.ca/college/sayre2/olc/micro_olc/pi2_qq07.html
(317 words)
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| | FRB Minneapolis Research Archive - Reassessing Aggregate Returns to Scale With Standard Theory and Measurement - ... |
| | Rather than the standard finding of increasing returns, we show that standard theory and conventional measures of output and inputs yield estimates of constant returns to scale at the aggregate level. | | | Previous studies argued that one must adopt a specification of the production function with substantial unobserved service variation to reconcile constant returns with the data. | | | Reassessing Aggregate Returns to Scale With Standard Theory and Measurement |
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http://woodrow.mpls.frb.fed.us/research/common/pub_detail.cfm?pb_autonum_id=928
(196 words)
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| | Returns to scale |
| | Returns to scale are the increase in output that results when a firm increases all its inputs by the same percentage. | | | The Big Wrap will experience returns to scale if it hires 1 extra person and opens an identical deli in one or both of the other terminals. | | | The Big Wrap hires 1 person to sell sandwiches in its deli in one of the three terminals at your nearby airport. |
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http://occawlonline.pearsoned.com/bookbind/pubbooks/parkin_awl/medialib/glossary/returnstoscale.html
(70 words)
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| | Examples and exercises on returns to scale |
| | If there are two inputs and the production technology has fixed proportions, the production function takes the form | | | so this production function has constant returns to scale. | | | If there are two inputs and the technology is described by a Cobb-Douglas production function then the production function takes the form |
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http://www.chass.utoronto.ca/~osborne/2x3/tutorial/RTSEX.HTM
(119 words)
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| | Returns to Scale |
| | If output less than doubles, returns to scale are decreasing. | | | If output more than double, returns to scale are increasing. | | | Another long-run concept is that of “returns to scale.” Returns to scale can either be decreasing, constant or increasing. |
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http://www.carleton.ca/vpac/110398/tsld005.htm
(54 words)
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| | Returns to Scale |
| | as inputs, we have constant returns to scale. |
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http://www.auburn.edu/academic/classes/agec/duffypa/2005review3/sld028.htm
(8 words)
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| | Output Frontier and Increasing Returns to Scale |
| | Since output sets are non convex if at least one activity has increasing returns to scale, the DEA is showed to be inappropriate to study economic sectors facing increasing returns to scale. | | | Convex output set is common hypothesis in production theory and empirical applications such as the Data Development Analysis. | | | The other two methodologies, the Free Disponible Hull and the econometric parametric method, could also imply mistakes if output frontier estimations do not take into account the link between returns to scale and output frontier shapes. |
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http://ideas.repec.org/p/sei/seiiwp/991001.html
(310 words)
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| | EconPapers: Estimates of the Returns to Scale for US Manufacturing |
| | Keywords: mark-ups; procyclical productivity; quasi-fixity of capital; Returns to Scale (search for similar items in EconPapers) | | | Abstract: This paper estimates the degree of the returns to scale for 2-digit U.S. manufacturing industries from the output-based primal and price-based dual equations implied by firms' cost-minimization problems. | | | Estimates of the Returns to Scale for US Manufacturing |
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http://econpapers.repec.org/paper/cprceprdp/2121.htm
(321 words)
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