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Open Access
Article
Publication date: 13 December 2019

Baoping Ren and Wei Jie

Constant or decreasing returns and increasing returns to scale are two kinds of mechanism in economic growth. The goal of supply-side structural reform is to promote the…

1940

Abstract

Purpose

Constant or decreasing returns and increasing returns to scale are two kinds of mechanism in economic growth. The goal of supply-side structural reform is to promote the establishment of the mechanism with increasing returns to scale. The paper aims to discuss this issue.

Design/methodology/approach

This paper argues that the overall economic structure of the developing economy has been divided into the sector of constant or decreasing returns to scale and the sector of increasing returns to scale due to the dual economic structure. Among them, the supply-side structural reform is mainly to reduce the sector of decreasing returns to scale and increase the sector of increasing returns to scale. Based on the hypothesis of such two-sector economic structure in the supply side of developing economies and on the industrial data, this paper empirically tests the returns to scale of China’s supply structure. The result suggests that so far the sector of constant or decreasing returns to scale dominates the supply structure of China’s economic growth, which results in the state of decreasing returns to scale in China’s overall economy.

Findings

Therefore, to realize the long-term sustained growth and transformation of the development pattern of China’s economy, the authors must carry out the supply-side structural reform, vigorously develop the modern industrial sectors characterized by modern knowledge and technology, and promote the development of an innovation-driven economy.

Originality/value

Besides, the authors must accelerate the transformation from traditional industrial sectors to modern industrial sectors, actively promote China’s industrial structure toward rationalization and high gradation, as well as build a modern industrial system so as to facilitate the formation of the mechanism of increasing returns to scale and accelerate the transformation of the driving force of China’s economic growth.

Details

China Political Economy, vol. 2 no. 2
Type: Research Article
ISSN: 2516-1652

Keywords

Article
Publication date: 20 August 2018

Ling Ma, Alexander Nuetah and Xiuqing Wang

The purpose of this paper is to investigate the role of market power and returns to scale in the determination of farm-value share.

Abstract

Purpose

The purpose of this paper is to investigate the role of market power and returns to scale in the determination of farm-value share.

Design/methodology/approach

This paper utilizes the equilibrium displacement model to investigate the role of market power and returns to scale in the determination of farm-value share. Contrary to the current literature, the paper incorporates oligopoly power, oligopsony power and non-constant return to scale into one generalized model, which systematically enables us investigate the impacts of market power on the determination and changes of farm-value share.

Findings

The results imply that market power as well as non-constant returns to scale is central to the understanding of farm-value share. These, in turn, indicate that ignoring the impacts of market power and degree of return to scale may overestimate or underestimate the impacts of exogenous shocks on changes in farm-value share.

Originality/value

Thus, to the best of the authors’ knowledge, no literature has examined the co-existence of oligopsony power, oligopoly power as well as non-constant return to scale in farm-value share determination. This paper therefore tries to fill this gap.

Details

China Agricultural Economic Review, vol. 11 no. 1
Type: Research Article
ISSN: 1756-137X

Keywords

Article
Publication date: 1 January 2006

Nayantara D. Hensel

To examine whether Japanese commercial banks exhibited economies of scale and economies of density at the time when the mega‐merger wave in Japanese banking began in the late…

2309

Abstract

Purpose

To examine whether Japanese commercial banks exhibited economies of scale and economies of density at the time when the mega‐merger wave in Japanese banking began in the late 1990s. Since this merger wave has not yielded efficiencies, this analysis aims to shed light on whether banks, at the start of the wave, had reason to believe that larger banks would be more efficient.

Design/methodology/approach

Using a modified version of the translog cost function, the analysis estimates economies of scale and economies of density for Japanese city banks, trust banks, and regional banks. Then, the relationship between size and economies of scale/density and that between profitability and scale/density are explored using regression analysis.

Findings

Results suggest that larger banks (as measured by value of assets/loans/ deposits/investments, and number of employees/branches) were more likely to be in the decreasing/constant returns to scale/density region than smaller banks, The finding was statistically significant for all three types of Japanese banks. On average, city banks exhibited diseconomies of scale/density; trust banks exhibited constant returns to scale and increasing returns to density, and regional banks exhibited increasing returns to scale and density. This suggests that unions between city banks and either regional banks or trust banks may have been more likely to yield cost‐efficiencies, and raises questions concerning the efficiency motivations of the mega‐bank mergers. The findings further indicate that banks with higher sales were more likely to have exploited scale/density efficiencies, and that banks with higher net incomes were more likely to be in the increasing returns region.

Originality/value

This paper suggests that the mega‐merger wave in Japan in the late 1990s may not have been motivated by a desire for greater efficiencies through utilization of under‐utilized branch networks. Unlike other studies, this analysis differentiates between economies of scale and economies of density.

Details

International Journal of Managerial Finance, vol. 2 no. 1
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 16 May 2008

Maiju Johanna Perälä

This paper aims to investigate whether empirical evidence for scale economies can be found across countries and if so, whether this evidence varies across the stage of development.

Abstract

Purpose

This paper aims to investigate whether empirical evidence for scale economies can be found across countries and if so, whether this evidence varies across the stage of development.

Design/methodology/approach

The paper uses statistical methods to make comparisons between countries.

Findings

The empirical results suggest overall evidence towards aggregate increasing returns across all samples. Within the Cobb‐Douglas framework, stronger evidence for aggregate increasing returns is found among samples depicting economies in the early stages of development. The CES framework in turn supports aggregate scale economies for advanced economies, while unitary elasticity of substitution cannot be rejected for less developed economies, giving further support for the Cobb‐Douglas estimates.

Research limitations/implications

Given that evidence for scale economies is found within different estimation frameworks for different groups of economies, comparative judgment is prevented. The results nevertheless provide evidence on the overall relevance of scale economies within and across groups of economies, while also giving a clear indication of the relevance of stage of development in economic growth and development analysis.

Originality/value

The most fundamental insight of the empirical results presented in this paper is that there is no reason to assume that the determinants of growth or the parameters guiding economies' adjustments towards their steady states or growth paths will be similar for economies at different stages of development, given their significant structural differences, whether in terms of production structures and characteristics or consumption patterns.

Details

Journal of Economic Studies, vol. 35 no. 2
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 31 August 2012

Habtu T. Weldegebriel, Xiuqing Wang and Anthony J. Rayner

The purpose of this paper is to develop a theoretical model of price transmission from the farm to the retail sector, allowing not only for an interaction between oligopoly power…

Abstract

Purpose

The purpose of this paper is to develop a theoretical model of price transmission from the farm to the retail sector, allowing not only for an interaction between oligopoly power, oligopsony power and non‐constant returns to scale in industry technology, but also allowing for the market power conduct parameters to vary in response to an industry‐wide exogenous shock. Also, the degree of price transmission under imperfect competition relative to that under perfect competition is evaluated.

Design/methodology/approach

Conjectural variations are used to parameterize both seller and buyer market power conduct of the industry and then the equilibrium displacement approach is applied to solve a system of six structural equations which describe the demand for and supply of industry retail output and farm and marketing inputs.

Findings

First, it is found that given empirical values of retail output demand elasticity, of farm and marketing inputs supply elasticities, of market power conducts, and of the returns to scale measure, the degree of price transmission under imperfect competition is greater than that under perfect competition. Second, it is found that the relative degree of price transmission under imperfect competition could be greater or smaller under the assumption of a varying market power conduct than one under the alternative assumption of a constant market power conduct, depending on whether market conduct is falling or rising, respectively.

Originality/value

The paper makes two original contributions to the literature. First, it allows for an interaction between oligopoly power, oligopsony power and industry technology. Second, it allows both oligopoly and oligopsony power parameters to vary in response to industry‐wide exogenous shocks.

Details

China Agricultural Economic Review, vol. 4 no. 3
Type: Research Article
ISSN: 1756-137X

Keywords

Article
Publication date: 1 February 1991

Pablo E. Guidotti, William H. Kaempfer, Alexander M. Pietruska and Leonard F.S. Wang

Recent studies on the welfare implications of internationallymobile capital for a country employing commercial policy have beenrestricted to constantreturnstoscale (CRS…

Abstract

Recent studies on the welfare implications of internationally mobile capital for a country employing commercial policy have been restricted to constantreturnstoscale (CRS) production models. It is generally concluded that the pursuit of such policies is welfare‐decreasing under CRS conditions. The analysis to encompass variable‐returnstoscale (VRS) is generalised and it is shown that there is an optimal (second best) combination of import tariff and foreign capital subsidy that will not be “immiserising” for an increasing‐returnstoscale (IRS) industry.

Details

Journal of Economic Studies, vol. 18 no. 2
Type: Research Article
ISSN: 0144-3585

Keywords

Book part
Publication date: 31 May 2016

Patrick McCarthy

This research estimates a multi-product flexible cost function of airport variable costs. Data for the analysis are a panel of 50 airports from 1996 to 2008. Output includes…

Abstract

This research estimates a multi-product flexible cost function of airport variable costs. Data for the analysis are a panel of 50 airports from 1996 to 2008. Output includes domestic and international departures, non-aeronautical operating revenues, and the number of transport workload units, where a workload unit is a passenger or the equivalent of a 220 pound packet of cargo. The quasi-fixed factor is the equivalent number of 10,000′ × 150′ runways at an airport. After correcting for first-order serial correlation, the analysis finds that airports operate under constant returns to runway utilization and multi-product decreasing returns to scale, production technology is consistent with product specific returns to capacity utilization and anti-complementarity across outputs, and general airport operations have input substitution possibilities with personnel and contractual repair/maintenance inputs. The study also finds 1.05% technology progress over the sample period, due to strong growth prior to 2001, with similar productivity growth rates for large and medium hubs.

Article
Publication date: 9 May 2016

Amit Sharma, Victor Eduardo Da Motta, Jeong-Gil Choi and Naomi S. Altman

Economic production analysis can provide critical perspectives on an industry’s performance. The purpose of this paper is to investigate the factor input intensity of hospitality…

2040

Abstract

Purpose

Economic production analysis can provide critical perspectives on an industry’s performance. The purpose of this paper is to investigate the factor input intensity of hospitality and related industries, namely, accommodation, food service and amusement, gaming and recreation (AFAGR), compared to other service industries.

Design/methodology/approach

This paper compared AFAGR with other industries categorized as services by the North American Industry Classification System (NAICS). The NAICS code of up to four digits was used to collect data (US Census Bureau).

Findings

Results of this paper confirm extant literature that food service is more labor-intensive than other service industries; however, this was not true of accommodation and AGR industries. Similarly, while food service industry was relatively less intermediate input intensive than other service industries, accommodation and AGR were not. There were no significant differences between hospitality and other service industries (AFAGR) in their capital intensity. Another important finding was that while accommodation had constant results to scale, AGR had increasing returns to scale and food service industry was found to have decreasing returns to scale.

Research limitations/implications

This investigation only looked at the four-digit NAICS-coded industries. International differences could also be investigated in the future.

Practical implications

Based on theoretical arguments, high labor intensity together with low intermediate input in food service industry suggests that efficiencies could be gained in these businesses. This may also be evident by the decreasing returns to scale that this paper found for the food service industry. These comparisons could guide additional research about the causes, consequences and potential sources of improvement of efficiency of economic productivity in AFAGR. Managers in AFAGR would find it valuable to understand how they might be able to enhance economic output, particularly in the context of the role of labor. Furthermore, any changes in one economic input would have implications on other inputs and possibly on productivity.

Social implications

Any future recalibration of input intensity in hospitality industries could have both social and economic consequence.

Originality/value

This paper enhances our understanding of how hospitality industries use economic factors of production. Labor in AFAGR is viewed as a given. This study suggests that food service industry may need to reevaluate its labor productivity, the way it is measured and how it might affect efficiencies. Such understanding could better inform the sources and causes of economic efficiencies in AFAGR industries. Until now, this understanding has mostly been based on relatively scarce comparative systematic analysis.

Details

International Journal of Contemporary Hospitality Management, vol. 28 no. 5
Type: Research Article
ISSN: 0959-6119

Keywords

Book part
Publication date: 7 November 2011

Rémy Herrera

This chapter is a radical critique of the neoclassical growth theory, justifying ways out of mainstream economics. It has three parts. The first one analyzes growth theories from…

Abstract

This chapter is a radical critique of the neoclassical growth theory, justifying ways out of mainstream economics. It has three parts. The first one analyzes growth theories from the Classical representation to the endogenous growth models. The second part demonstrates that the “new growth theory” is not a break with Solow's formalization. To prove it, we build an original Solowian endogenous growth model. Then, this neoclassical macrodynamic framework is technically, deeply critized in a third part. We show that both exogenous and endogenous neoclassical models prove to be incapable to explain growth in the long period. We concentrate on the ambiguities surrounding the hypothesis of single agent, as well as on the role of the state, in particular when it is considered as a “planner” by the neoclassicals. Endogenous growth models do not correspond to macrodynamization of the Walrasian general equilibrium, nor have solid microeconomic bases. We advocate in favor of rehabilitating state's intervention in social areas and of reactivating Marxist theoretical reflections regarding social planning and class analysis in the current time of structural crisis of the capitalist world system.

Details

Revitalizing Marxist Theory for Today's Capitalism
Type: Book
ISBN: 978-1-78052-255-5

Book part
Publication date: 12 September 2017

Anna Bottasso and Maurizio Conti

This chapter examines the main methodological issues involved in the comprehension of the cost structure of the airport industry and suggests considerations for future airport…

Abstract

This chapter examines the main methodological issues involved in the comprehension of the cost structure of the airport industry and suggests considerations for future airport cost analyses. Such understanding has become a crucial concern for policy makers, regional planners, and managers in order to deal with optimal market design (e.g., regulation and market configuration) and airport strategies (e.g., pricing, investments, and alliances). An in-depth analysis of the economics of cost functions is presented, together with a description of the relevant multi-output cost economies measures (average incremental costs, scale and scope economies, and cost complementarities). We also discuss the assumptions underlying estimates of total versus variable cost functions and the importance of estimating a sufficiently flexible functional form. Moreover, we provide a critical survey of the international empirical literature on the cost structure of the airport industry, which highlights how econometric estimates strongly depend on the sample choice and the empirical model considered. Indeed, while econometric studies on international samples based on long-run cost function estimates show that long-run scale economies are never exhausted, single country studies mostly estimate variable cost functions and find lower values for scale economies at median sample points that tend to decrease with size. We discuss why we believe that studies based on the estimation of short-run variable cost functions offer more reliable results, given the reasonable assumption of airport overcapitalization in the short run. We conclude our work by noting that underlying policy issues related to planning and regulation, as well as to the optimal market structure of the airport sector, need to take into account the role played by vertical relationships between airports and airlines.

Details

The Economics of Airport Operations
Type: Book
ISBN: 978-1-78714-497-2

Keywords

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