Increasing returns in the aggregate: fact or fiction?

Abstract

If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -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.

Decentralized Environmental Regulation in a Model with Increasing-Returns-to-Scale

“…What if we relax this modeling assumption allowing for increasing-returns-to-scale (IRS)? There is moderate empirical evidence supporting aggregate IRS, for traditional production inputs, at the jurisdictional level (Perälä, 2008). In this paper, symmetric regions in a Nash equilibrium may overprotect the environment under aggregate IRS and firstbest taxation.…”

“…which is homogeneous of degree α > 1. 5 When α = 1 the production function exhibits constant-returns-to-scale (CRS). Firms and regional authorities view α as parametric.…”

“…Inequalities in both example equations (7) and (9) hold for all relevant input combinations from equations (3) -(5).…”