Production Factor Returns: The Role of Factor Utilisation

22 Pages Posted: 17 Feb 2011

See all articles by Gilbert Cette

Gilbert Cette

Banque de France

Nicolas Dromel

Paris School of Economics (PSE)

Remy Lecat

Banque de France

Anne-Charlotte Paret

Banque de France

Date Written: January 2011

Abstract

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

Cette, Gilbert and Dromel, Nicolas and Lecat, Remy and Paret, Anne-Charlotte, Production Factor Returns: The Role of Factor Utilisation (January 2011). Banque de France Working Paper No. 317, Available at SSRN: https://ssrn.com/abstract=1761968 or http://dx.doi.org/10.2139/ssrn.1761968

Gilbert Cette (Contact Author)

Banque de France ( email )

Paris
France

Nicolas Dromel

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

HOME PAGE: http://www.nicolas-dromel.com

Remy Lecat

Banque de France ( email )

Paris
France

Anne-Charlotte Paret

Banque de France ( email )

Paris
France

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