economies of scale in multi product firms an empirical analysis this paper presents new evidence on scale economies in multiproduct firms previous studies are limited in view of r ecent advances in the theory of the multiproduct firm the water util ity is chosen here as a multiproduct firm providing multiple services to various classes of customers with spatial variation a translog m ultiproduct cost function is estimated based on duality between tran sformation and cost functions the paper analyzes overall as well as product specific scale economies it also discusses ray average cos t curves and derives the m locus which provides useful information on scope economies and the cost minimizing number of firms copyright 1987 by the review of economic studies limited

electoral politics and the executive veto a predictive theory we argue that winner take all voting in states and the unequal distribution of electoral votes across states in presidential elections makes incumbent presidents rationally place more weight on the preferences of voters in closely contested larger states when making policy decisions this hypothesis is tested by examining whether presidential veto decisions are influenced by the floor votes of senators from these electorally crucial states in a pooled sample of 325 individual bills from 1970 through 1988 we find significant evidence of this behavior by incumbent presidents

a cost function of greek non ferrous metal industry abstract a translog cost function in the form of a third order series taylor expansion was used for the estimation of cost in the greek non ferrous metal industry which is based on an annual time series for the period 1969 1990 concerning the price of production factors the production volume and the total cost of production the estimated cost function permit us to have average and marginal cost curves of typical form for each time point also it is useful for projecting costs and the optimum scale of production under conditions which concern 1 i the development of prices production and product factors and 2 ii demand

is perfect competition an empirically inadequate model this paper examines the empirical content of the neoclassical theory of the firm the main models perfect competition monopolistic competition pure monopoly are specified in terms of observable anomalies these models are then tested against data and against each other the findings pave the way for an appraisal of the empirical status of the perfectly competitive model relative to the data and relative to the other neoclassical models

on the concepts of returns to scale abstract we clarify various concepts of returns to scale scattered in the literature by presenting their six different concepts we find the global relationship among them and apply some of the results to determine the shape of the average cost curves

why democracies produce efficient results by applying the standard tools of microeconomic analysis i argue that democratic markets work as well as economic markets in particular i show that previous work has greatly exaggerated the existence of principal agent and informational problems in electoral markets and has drawn incorrect conclusions

parametric efficiency tests economies of scale and input demand in u s electric power generation duality theory has been applied increasingly in recent years to study the structure of production a major advantage of using duality theory is that systems of input demand equations can be derived by simple differentiation facilitating the use of flexible functional forms also use of duality theory makes it possible to choose a representation of the technology which has desirable properties for estimation such as exogeneity of the regressors however the use of a dual representation of production structure is appropriate only if the corresponding maintained hypothesis concerning economic behavior e g cost minimization or profit maximization is valid the perceived advantages of the dual approach to studying production structure have led to some applications in which the maintained hypothesis concerning economic behavior is unlikely to be appropriate for example neoclassical cost functions have been used to study the characteristics of production in regulated industries despite an extensive theoretical literature indicating that a profit maximizing regulated firm would not minimize costs subject to market prices 2 in this paper we propose a generalized cost function that retains the principal advantages of the neoclassical cost function but does not require that cost minimization subject to market prices be imposed as a maintained hypothesis in our model firms are assumed to base their production decisions on unobservable shadow prices which reflect the effects of regulation on the effective prices of inputs parametric tests for cost minimization are obtained by expressing shadow prices as functions of market prices the generalized cost function is estimated with data for regulated electric utilities the parametric restrictions corresponding to cost minimizing behavior subject to market prices are rejected implying that the use of a neoclassical cost function is not appropriate in this application 3

an empirical analysis of scale and scope economies and technical change in an irish multiproduct banking firm abstract in contrast to most empirical investigations of the efficiency of multiproduct financial institutions which either estimate scale and scope economies with a given state of technology or only analyse technical change in the presence of overall scale economies this study estimates overall scale economies product specific scale economies and scope economies in the presence of both neutral and non neutral technical change also in contrast to most other empirical studies in this area standard errors are computed for all relevant statistics the findings indicate diseconomies of scope overall diseconomies of scale product specific economies are decreasing for investments and increasing for loans in addition to substantial neutral technical change biased technical change is labour and capital saving and deposits using in character

explaining government growth in the u s states despite the explosive increase in the research program on government growth in recent years little work has been done on government growth disaggregated to the subnational level i examine the empirical validity of five competing models of government growth for the fifty u s states from 1945 to 1984 wagner s law fiscal illusion party control bureau voting and intergovernmental grant government size is defined in terms of state government spending as a proportion of total state economic output with separate implicit price deflators being employed for the public and private sectors based on a longitudinal test of these competing models the analysis uncovers strong empirical support for the bureau voting and intergovernmental grant models moderately weak support for the wagner s law model and virtually no support for the fiscal illusion and party control explanations these findings have important implications for the study of government growth in general and more specifically in the states

real options wage bargaining factor subsidies and employment the paper combines a translog variable cost function a bargaining model of wage determination and a real option model determining real capital using this framework the effect of factor subsidies on labour demand is estimated based on aggregate panel data for norwegian manufacturing industry in the period 1980 1988

divided we vote divided government is known to correlate with limited government but less is understood about the empirical conditions that lead to divided government this paper estimates the determinants of continuous and categorical measures of divided government in an empirical macro political economy model using 30 years of data from the american states voters support more divided government after increased government spending per dollar of tax revenues but more unified government after worsening incomes and unemployment rates only conditional support is found for the strategic moderating theory alesina and rosenthal in econometrica 64 6 1311 1341 1996 that focuses purely on midterm cycles and split ticket voting absent economic conditions

diseconomies of size with fixed managerial ability managerial ability has important implications for farm growth in this article we first show in a production model that increasing output with a fixed level of managerial ability can lead to a decrease in profits next we discuss the effect that managerial ability has on economies of size in the empirical part economies of size are estimated for a sample of dairy farms using a proxy for managerial ability which is calculated as a technical efficiency index the results show that increasing farm size while holding managerial ability constant can be an important source of diseconomies of size copyright 2003 oxford university press

balanced budget redistribution as the outcome of political competition this paper models balanced budget redistribution between socio economic groups as the outcome of electoral competition between two political parties equilibrium is unique in the present model and a sufficient condition for existence is given requiring that there be enough stochastic heterogeneity with respect to party preferences in the electorate the validity of hotelling s principle of minimum differentiation and of director s law are examined under alternative hypotheses concerning administrative costs of redistributions and voter s possibilities both of abstaining from voting and of becoming campaign activists for one of the parties the policy strategy of expected plurality maximization is contrasted with the strategy of maximizing the probability of gaining a plurality incomes are fixed and known so lump sum taxation is feasible however constraints on tax transfer differentiation between individuals are permitted in the analysis

redistributive politics and economic efficiency the political process often compensates the losers from technical change or international competition in an economically inefficient way namely by subsidizing or protecting declining industries instead of encouraging the movement of resources to other more productive uses we find that a dynamic inconsistency in the game of redistributive politics contributes to this outcome to achieve economically efficient outcomes it is necessary that those making economically inefficient choices not be given offsetting transfers but the political process distributes income on the basis of political characteristics which are in general different from the economic characteristics that are rewarded by the market we identify circumstances in which the inefficient choosers have desirable political characteristics and are therefore immune from threats of having to face the economic consequences of their choices

democrats republicans and taxes evidence that political parties matter i estimate the influence of political parties on state tax burdens over a forty year period 1960 2000 holding constant a large number of state and voter characteristic variables i find that i tax burdens are higher when democrats control the state legislature compared to when republicans are in control ii the political party of the governor has little effect after controlling for partisan influences in the state legislature i explain how both findings are consistent with median voter theory my results suggest that after five years of democratic control of the legislature state government would be approximately 3 to 5 percent larger than if republicans controlled the legislature during that same period with the better specifications producing estimates in the higher end of this range

variable costs and the visible hand the re regulation of electricity supply 1932 37 national transmission grid and rationalize uk electricity generation a constrained cost model estimates the gains from this re regulation of the electricity generating industry the new regime reduced costs by one third radically improving the utilization of capital and boosting the average scale of operations it did so by persuading private and municipal enterprises to accept central direction of the extent and timing of their electricity generation this voluntarism saved on enforcement costs but perhaps one half of the industry cost reduction the ceb actually achieved by 1937 was apparently forgone

modeling location and production an application to u s fully integrated steel plants i n weber s 1929 theory of the location of industry spatial firms produce under conditions of fixed proportions and constant returns to scale while their spatial consumers have priceinelastic demands weber s assumptions are relaxed separately in previous work moses 1958 and alonso 1967 allow either for flexible technologies but inelastic demands or for pricesensitive demands but fixed proportions technologies this paper presents a behavioral and econometric model of spatial firms which simultaneously relaxes restrictive assumptions on both technology and demand assumptions of earlier models become testable hypotheses the behavioral model is general to any spatial firm the econometric model can be estimated for any industry the paper reports an estimation of the model for a sample of fully integrated steel plants in the united states the steel industry is appropriate for illustrating the general model for two reasons first the important inputs in steel are localized weight losing materials while transportation charges are a nontrivial part of the delivered prices of both these inputs and of steel products second previous research lacks agreement about the principal determinants of steel plant locations disagreement also exists over the structure of production and the extent of scale economies in production and the existence of substitution possibilities among inputs each of these disagreements is treated as a hypothesis within this paper first a model which includes the influences of both consumers and materials on location can distinguish the comparative influence of each the literature lacks agreement on whether the steel industry is transport oriented in which case consumer demands are price inelastic and an optimal location minimizes transport costs or market oriented in which case consumer demands are price elastic and an optimal location reflects that sensitivity isard 1948 suggests the influences on location change over time due to changes in technology and relative prices isard and capron 1949 conclude the steel industry is transport oriented more recently hekman 1978 reports that the demand for steel is priceelastic he concludes that locations in the steel industry are sensitive to consumer demands the evidence in this paper portrays the steel industry as transport oriented second there are differing estimates of the extent of scale economies in steel production ranging from constant returns to scale hekman 1978 to a minimum efficient scale m e s of twelve million tons cockerill 1974 scherer 1973 and weiss 1976 estimate m e s of four million tons while tarr 1977 gives the mid1970s m e s at six million tons an estimate reported in this paper as well third the existence of substitution possibilities among inputs has implications for both location and production if substitution possibilities are limited weber models of location may be applied to the steel industry previous research has characterized steelnmaking technology as fixed proportions tsao and day 1971 cobb douglas hekman 1978 or having wide variation in substitution possibilities kopp and smith 1980 moroney and trapani 1981 this paper presents estimated elasticities of substitution suggestive of great substitution possibilities among inputs the behavioral model of location and production is presented and then transformed into an econometric model in section ii a brief discussion of regional markets for steel products and a description of the data appears in section iii received for publication july 31 1981 revision accepted for publication july 7 1982 wayne state university this research is based on my ph d dissertation at the university of wisconsin madison the advice of frank m gollop eugene smolensky and charles a wilson is gratefully acknowledged i have benefited from discussions with james hamilton and li way lee and comments by jan brueckner and several anonymous referees computing support has been provided by the graduate schools at the university of wisconsin madison and wayne state university the responsibility for any remaining errors is mine an earlier version of this paper was presented at the 1980 north american meetings of the econometric society

the elasticity of scale and the shape of average costs different concepts of returns to scale the first which is most widely used for defining returns to scale is the relative increase in output as all input quantities are increased proportionally along a ray through the origin the second which is the more relevant concept for micro economic analysis is the increase in output relative to costs for variations along the expansion path where input prices are constant and costs are minimized at every output 2 as it turns out these two concepts yield equal measures for the elasticity of scale3 e at every minimum cost point in the input space however the change in e with output is generally different for the two concepts 4 since expansion paths do not coincide with rays unless the production function is homothetic 5 but it is the change of e along the expansion path and not along the raywhich determines the shape of the average cost curve ac and which is therefore relevant for the analysis of firms and industry behavior under competition 6 these relations are stated and analyzed below it is shown that assumptions made in the literature7 which are related to the behavior of e along rays or to the slope of the technically optimal surface where returns to scale are locally constant are irrelevantbeing neither necessary nor sufficient for implying classical u shaped average cost curves the following definitions and results are used here

an examination of cost structure and production performance of commercial banks in singapore abstract this paper uses a parametric approach in the framework of a translog cost function and a non parametric approach in the framework of linear programming to examine production performance and cost structure of a sample of singaporean commercial banks the results of the parametric methodology suggest that the average cost curve of these banks is u shaped and there are economies of scale for small and medium size banks further analysis provides evidence of economies of scope for all banks regardless of their size the non parametric results indicate that the singaporean banks could have reduced cost by 43 had they all been overall efficient the sources of this cost inefficiency seem to be caused equally by allocative and technical inefficiencies

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

the political economy of benefits and costs a neoclassical approach to distributive politics this essay offers a rational political explanation for the notorious inefficiency of pork barrel projects with an optimization model of legislative behavior and legislative institutions the model emphasizes the economically arbitrary from a welfare point of view importance of the geographic incidence of benefits and costs owing to the geographic basis for political representation we explore the implications of a legislator s objective function and derive conditions under which a representative legislature will select an omnibus of projects each of which exceeds the efficient scale

input substitution economies of scale and productivity growth in the us upholstered furniture industry cost factor demand and productivity growth are considered in the upholstered furniture industry over 1958 87 factors are divided into labour capital and materials it is found that all inputs are substitutes in production although substitution elasticities are small factor demand is price inelastic for all inputs the industry operates around minimum average cost productivity growth is small but significant the results indicate that labour will continue to be important in the industry however regional comparative advantage is not related to labour alone the results suggest that policies to attract or retain the industry must consider the low degree of factor substitution

returns to scale in the long run the dynamic theory of cost the concept of scale economies is muddled by the problem specific nature of determining the length of run the distinction between the short and long run becomes a prime consideration in determining the appropriate time scale of economic decision making strategies these strategies center on the choice of factors of production that are assumed to be fixed when factor allocation decisions are to be made

deviations from constituent interests the role of legislative structure and political parties in the states this paper investigates the determinants of state spending over 1960 1990 recent empirical studies suggest that state government expenditure is greater than the electorate desires our main finding is that expenditure was positively related to the number of seats in a state s legislature this is consistent with the hypothesis that logrolling leads representatives to spend more than their constituents would like we also find that political parties do not have a pronounced effect on overall levels of expenditure but do influence the composition of spending in particular democratic control of state government is associated with higher levels of welfare spending

multiple input multiple output production choices and technology in the u s wheat region duality theory motivates a translog expected profit function consistent with multiple products price uncertainty preseason climate constraints acreage control policies and possibly nonhomothetic technology although multiple outputs are allowed enterprise specific data is not necessary instead time series measures of output revenues and expected prices input expenses and prices and fixed input flows are employed appropriate measures of elasticities of choice returns to size and biases in technological change are derived results indicated decreasing returns to size rather limited though complementary responsiveness of choices to price changes and the nature of biases in technological changes

production economies of small depository institutions in the post firrea era evidence from cooperative banks to evaluate the effects of the financial institutions reform recovery and enforcement act firrea of 1989 on the cost behaviour of thrift institutions this study examines the economies of scale and scope of cooperative banks for the years 1992 94 the findings provide evidence of economies of scale and scope over the period under study in addition the results suggest the presence of product specific economies of scale and scope with respect to a few of the products included in the portfolios of the samples some policy implications are drawn based on the findings

off farm labour and the structure of us agriculture the case of corn soybean farms while the growing importance of off farm earnings suggests large benefits accrue to farmers from efforts to expand off farm income opportunities economic well being also depends on greater efficiency to comprehensively gauge the economic health of farm operator households off farm income is interpreted as an output along with corn soybeans livestock and other crops to accomplish this task two related methodologies were used first using 2000 data a multi activity cost function was set up to analyse labour allocation decisions within the farm operator household and also to estimate returns to scale and scope second using 1996 2000 data an input distance function approach was followed to estimate returns to scale cost economies and technical efficiency and the relative performance of farm operator households with and without off farm wages and salaries compared the cost function and input distance function results both suggest that off farm outputs and inputs can be modelled in a multi activi

a scale elasticity measure for directional distance function and its dual theory and dea estimation abstract in this paper we focus on scale elasticity measure based on directional distance function for multi output multi input technologies explore its fundamental properties and show its equivalence with the input oriented and output oriented scale elasticity measures we also establish duality relationship between the scale elasticity measure based on the directional distance function with scale elasticity measure based on the profit function finally we discuss the estimation issues of the scale elasticity based on the directional distance function via the dea estimator

ideology tactics and efficiency in redistributive politics we model the electoral politics of redistribution when voters and parties care about inequality in addition to their private concerns for consumption and votes respectively ideological concerns about income redistribution lead each party to adopt a general proportional income tax adjusted to appeal to the ideological leanings of high clout groups with disproportionately many swing voters which the parties also ply with pork barrel projects our results relate to director s law which says that redistributive politics favors middle classes at the expense of both rich and poor

measuring productivity in an imperfect world most measures of multifactor productivity mfp assume constant returns to scale and perfect competition using a general aggregate production function together with duality theory and allowing for the possibilities of disequilibrium markups and economies of scale the study derives a more generalized mfp measure the model was used to assess the economic performance in us manufacturing for the 1949 to 1988 period the results suggest that scale and markups have substantial power in explaining mfp growth for all periods and that half of the measured mfp growth as measured within the conventional framework comes from biases due to scale economies market power and interaction effects

product differentiation heterogeneous labor and non homotheticity statics and dynamics the problem of product diversity and product differentiation under chamberlinian monopolistic competition has been attracting a great deal of attention recently instrumental to this is perhaps the discovery of the dixit stiglitz utility function 7 in conjunction with revived interest in scale economies the d s utility function framework has been useful to make general equilibrium analysis tractable and facilitate obtaining many interesting results scale economies provide an additional appealing feature to the results the application to other fields notably to international trade theory is impressive thus dixit norman 6 265 wrote the large volume of intra industry trade estimated at 50 of world trade by grubel lloyd 8 can only be understood in the context of product differentiation and economies of scale this line of research reached a culmination with the work of helpman krugman 13 this paper develops a general equilibrium model of monopolistic competition with nonhomothetic production and economies of scale and develops comparative statics and dynamics the lack of homotheticity enters through different types of labor skilled and unskilled the paper investigates two types of dynamic processes one leading to the chamberlinian tangency solution and the other leading to a stable allocation of skilled and unskilled labor in the economy unlike virtually all studies on this topic we have not postulated that the chamberlinian tangency solution or the zero profit condition prevails at the outset of their analysis instead we investigate whether or not the chamberlinian process of achieving the tangency solution via entry or exit of firms depending of course on profits and losses of firms in the industry is indeed stable under a general equilibrium framework with certain assumptions although this result may look intuitively obvious it may be contrasted to a different result obtained elsewhere by us 3 another problem that we are concerned with is the allocation of skilled labor and unskilled labor consider the economy which consists of manufacturing sector x and food sector y

hunting the whale more evidence on state government leviathans caplan holds that governments are leviathans seeking to extend their power by increasing government expenditures beyond the level preferred by voters we extend caplan s model by examining the real percentage growth rates of government we also examine whether government size increases at an increasing rate as the minority party weakens we find evidence that supports and fails to support the original leviathan hypothesis we also fail to support our extensions of caplan s hypothesis furthermore our significant and contrary results have intuitively appealing interpretations from these results we conclude that the impact of political party power on government spending is ambiguous

production location decision and free entry oligopoly abstract this paper presents a simple oligopolistic model of location in which all firms in an imperfectly competitive industry are assumed to produce a homogeneous output and make cournot conjectures about their rivals input and location decisions within this framework this paper points out that the key difference between oligopoly and monopoly is the following in the case of monopoly a positive shift in demand requires that a monopolist increase his output but in the case of oligopoly an increase in industry output may or may not increase output per firm because of the number of firms at free entry equilibrium is not constant it is shown that in an oligopoly model of location that allows free entry the demand condition plays an important role on the determination of industrial location

monopolistic competition nonhomotheticity and the stability of the chamberlinian tangency solution the focal point in the recent literature on international trade and monopolistic competition is to recast the chamberlinian partial equilibrium theory in a general equilibrium framework using a similar setting this paper asks whether the chamberlinian tangency solution is stable under general equilibrium paradoxical results follow when entry occurs profit per firm can increase and the tangency solution can be unstable a necessary and sufficient condition for stability is obtained the concepts of average and marginal factor intensities play an important role in obtaining the stability copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

electoral competition and special interest politics have fixed positions on some issues but vary their positions on others in order to attract votes and campaign contributions in this context we examine whether special interest groups are governed by an electoral motive or an influence in their campaign giving and how their contributions affect the equilibrium platforms we show that each party is induced to behave as if it were maximizing a weighted sum of the aggregate welfares of informed voters and members of special interest groups the party that is expected to win a majority of seats caters more to the special interests

returns to scale in electricity generation replicated and revisited abstract we replicate the findings of two influential studies on returns to scale in the united states electricity generation market the main results are contrasted using both local linear nonparametric regression a technique robust to parametric functional form assumptions as well as an updated data set while the quantitative findings across all of the estimators deployed differ somewhat regarding the magnitude of returns to scale we document a decrease in returns to scale within the electricity generation market from 1955 to 1996

means testing versus basic income the lack of political support for a universal allowance this paper studies the political economy of a basic income bi versus a means tested welfare scheme we show in a very simple setting that if society votes on the type of system its generosity as well as the severity of means testing if any a bi system could only emerge in the political equilibrium under very strong and empirically implausible conditions instead the political process leads to a means tested system the necessity to draw political support does affect the design of the system but it only implies that means testing becomes less severe so that benefits are extended also to themiddle classes however a fully universal system is rejected by a majority

monopolistic competition and the stability of industrial equilibrium abstract we consider a two sector economy consisting of the differentiated goods and the homogeneous goods industries where the former is monopolistically competitive with scale economies we show that the chamberlinian tangency solution is unstable when the supply side is characterized by the heckscher ohlin two factor model

an economic analysis of technology in the meat products industry the meat products industry underwent significant structural change during the last two decades the relocation and expansion of commercial cattle feeding stimulated development of new single species slaughtering facilities to replace older multi species plants an essentially new processing industry arose specializing in breaking and packaging carcasses this forward integration has significantly changed distribution methods of slaughtering and fabricating firms increased emphasis on coordination of inputs led to interest in backward integration from packing into cattle feeding the steer and heifer slaughtering sector which was decentralized and competitive in the 1950s has turned toward centralization and concentration although the largest firm accounted for only 13 of total u s steer and heifer slaughter in 1977 it had more than doubled its share since 1970 in 1978 this firm slaughtered more than twice as many steers and heifers as its nearest competitor in addi

a multiple output multiple input model of the hospital industry in north carolina 1983 a multiple output multiple input model of the hospital industry in north carolina applied economics vol 15 no 3 pp 341 352

has leviathan been bound a theory of imperfectly constrained government with evidence from the states this paper develops a formal theory that combines power maximizing leviathan political parties with well defined imperfections in the political process the model implies that both parties tend to make government larger as their likelihood of electoral victory increases empirical tests on state level data confirm this prediction racing the leviathan hypothesis against alternative theories of party motivation indicates that both the leviathan and the contrasting ideologies views have some degree of validity the leviathan motive of politicians to maximize their power is a central assumption of the public choice approach to political economy this approach has been strongly attacked for underestimating the importance of competitive checks on politicians wittman 1989 1995 in particular broadly argues that electoral competition is an effective solution to whatever principalagent problem might exist between politicians and voters yet recent research in political economy dixit and londregan 1995 1996 1998 grossman and helpman 1996 casts renewed doubt on the efficiency of political markets formal models incorporating imperfections in the electoral process show that politicians have the latitude to deviate somewhat from citizen interests although politicians face constraints they retain some measure of monopoly power a conclusion consistent with the public choice literature the main difference between recent political economy and the public choice tradition arises from their assumptions about politicians objective functions the public choice approach tends to view all political parties as power maximizers whereas others see parties as either vote