A Note on Economies of Scale in Selected Stus

Indian Journal of Transport Management, Vol. 26, No. 2, pp. 207-224

13 Pages Posted: 4 Aug 2004

See all articles by Sanjay Kumar Singh

Sanjay Kumar Singh

Indian Institute of Management Lucknow

Abstract

The prime objective of this paper is to empirically investigate the nature of scale economies in State Transport Undertakings (STUs) in India on the basis of a sample of medium- and large-size Indian states for which consistent data are available. To examine this issue, a translog cost function is estimated jointly with factor share equations subject to required coefficient restrictions by using the method of 'Zellner's iterative' technique. An examination of optimal size of STUs reveals that most of the STUs deviate from their efficient level of production. In general, medium and large size STUs faced diseconomies of scale, whereas small size STUs experienced economies of scale. Evidence of higher costs in a non-competitive context, together with decreasing returns to scale, shows that the division of large monopolies into smaller firms covering different market segments for which they should compete would lead to a substantial amount of cost savings.

Keywords: Economies of scale, bus transport undertakings

JEL Classification: L32, L92, O30, R40

Suggested Citation

Singh, Sanjay Kumar, A Note on Economies of Scale in Selected Stus. Indian Journal of Transport Management, Vol. 26, No. 2, pp. 207-224. Available at SSRN: https://ssrn.com/abstract=572368

Sanjay Kumar Singh (Contact Author)

Indian Institute of Management Lucknow ( email )

Lucknow, 226013
India
+91 522 273 6637 (Phone)
+91 522 273 4005 (Fax)

HOME PAGE: http://ganga.iiml.ac.in/~sanjay/

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