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Title: Big and beautiful? On non-parametrically measuring scale economies in non-convex technologies
Authors: De Witte, Kristof ×
Marques, Rui #
Issue Date: Jun-2011
Publisher: Kluwer Academic Publishers
Series Title: Journal of Productivity Analysis vol:35 issue:3 pages:213-226
Abstract: Knowledge on the scale economies drives the incentives of regulators, governments and individual utilities to scale-up or scale-down the scale of operations. This paper considers the returns to scale (RTS) in non-convex frontier models. In particular, we evaluate RTS assumptions in a Free Disposal Hull model, which accounts for uncertainty and heterogeneity in the sample. Additionally, we provide a three-step framework to empirically analyse the existence and extent of RTS in real world applications. In a first step, the presence of scale (and scope) economies is verified. Secondly, RTS for individual observations are examined while in a third step we derive the optimal scale for a sector as a whole. The framework is applied to the Portuguese drinking water sector where we find the optimal scale to be situated around 7–10 million m3.
ISSN: 0895-562X
Publication status: published
KU Leuven publication type: IT
Appears in Collections:Research Center of Public Economics, Leuven
Teacher Training, Faculty of Economics and Business, Leuven
× corresponding author
# (joint) last author

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