| Author: | Basu, S. Fernald, J. G. |
| Title: | Returns to scale in U.S. production: Estimates and implications |
| Journal: | Journal of Political Economy
1997 : APR, VOL. 105:2, p. 249-283 |
| Index terms: | PRODUCTION USA ESTIMATION FINANCIAL THEORY MACROECONOMIC MODELS |
| Language: | eng |
| Abstract: | In U.S. a typical two-digit industry seems to have constant or slightly decreasing returns to scale. However, estimates often rise at high levels of aggregation, apparent decreasing returns contradicts evidence of only small economic profits, and estimates with value added differ substantially from those with gross output. These puzzles can be explained by a story of aggregation over heterogeneous units. Theory and evidence on aggregation invalidate the common use of demand-side instruments. A one-sector macroeconomic model that ignores heterogeneity may require firm-level parameters, but at some other times the model may require the biased aggregate parameters. |
SCIMA