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Title: Estimating economies of scale and scope with flexible technology
Authors: Triebs, Thomas P.
Saal, David S.
Arocena, Pablo
Kumbhakar, Subal C.
Keywords: Economies of scale and scope
Flexible technology
Electric utilities
Vertical integration
Translog cost function
Issue Date: 2016
Publisher: © Springer Science+Business Media
Citation: TRIEBS, T.P. ... et al, 2016. Estimating economies of scale and scope with flexible technology. Journal of Productivity Analysis, 45 (2), pp. 173 - 186.
Abstract: Economies of scope are typically modelled and estimated using a cost function that is common to all firms in an industry irrespective of their type, e.g. whether they specialize in a single output or produce multiple outputs. Instead, we estimate a flexible technology model that allows for type-specific technologies and show how it can be estimated using linear parametric forms including the translog. A common technology remains a special case of our model and is testable econometrically. Our sample, of publicly owned US electric utilities, does not support a common technology for integrated and specialized firms. Our empirical results therefore suggest that assuming a common technology might bias estimates of economies of scale and scope. Thus, how we model the production technology clearly influences the policy conclusions we draw from its characteristics.
Description: This paper is embargoed until February 2017.
Sponsor: Pablo Arocena and David Saal acknowledge financial support from the Spanish Ministry of Economy and Competitiveness (project ECO2010-21242-C03-03).
Version: Accepted for publication
DOI: 10.1007/s11123-016-0467-1
URI: https://dspace.lboro.ac.uk/2134/21949
Publisher Link: http://dx.doi.org/10.1007/s11123-016-0467-1
ISSN: 0895-562X
Appears in Collections:Closed Access (Economics)

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