Abstract
Economists are interested in returns to scale for three reasons. First, the equilibrium of an industry is dependent on the nature of its technology. Next, growth theorists, while attributing most of the growth in per capita output to factors other than the increase in capital intensity, are not able to agree whether productivity increases should be modelled as arising from technological change or scale effects. Finally, econometricians recognize the problems in identifying the two sources of productivity in any empirical study.
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Notes
- 1.
We can think of differentiation of a function f(x) with respect to x as application of an operator \(\frac{d} {dx}\) to the function f( ⋅); \(f^{\prime} = \left ( \frac{d} {dx}\right )f(x)\). Then second and higher order differentiation of the function can be viewed as repeated application of the operator to the function; \(f^{\prime\prime} = \left ( \frac{d} {dx}\right )\left ( \frac{d} {dx}\right )f(x)\). Notice that the infinitesimal operator is here the linear combination of two partial differential operators.
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Sato, R., Ramachandran, R.V. (2014). Technical Progress and Economies of Scale: Concept of Holotheticity. In: Symmetry and Economic Invariance. Advances in Japanese Business and Economics, vol 1. Springer, Tokyo. https://doi.org/10.1007/978-4-431-54430-2_2
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