Data Envelopment Analysis and translog production function for estimating returns to scale

What is it about?

This paper critically analyses, in the context of classical and neoclassical perspectives, the concepts of ‘returns to scale’ and ‘economies of scale’ by relating the former to the concept of ‘production unit’ and the latter to the concept of ‘firm’, and concludes that returns to scale constitutes only one component of economies of scale. The estimation models of frontier translog production function and DEA are applied to data on the Indian steel industry for a period of eight years in order to

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Why is it important?

In the literature, the two concepts - returns to scale and economies of scale are used interchangeably. In this paper, the distinction between the two concepts is historically examined in terms of their underlying causal factors.