Production Factor Returns: The Role of Factor Utilisation
22 Pages Posted: 17 Feb 2011
Date Written: January 2011
Short-term increasing returns to production factors are usually found in empirical studies. We argue they can be due to omitted variables, particularly the intensity of factor utilisation. Thanks to original French firm-level data (1992-2008), we show how increasing returns to scale disappear when working time, capacity utilisation rate and mainly capital operating time are introduced in the production function.
Keywords: Production function, productivity, factor returns
JEL Classification: D22, D24, E22, O40
Suggested Citation: Suggested Citation