Markups and Returns to Scale Estimation for Taiwan Industries
Date Issued
2010
Date
2010
Author(s)
Cheng, Wan-Jung
Abstract
In this paper, we use a more reliable estimation technique in the literature and more representative panel data to estimate returns to scale and markups of main manufacturing industries in Taiwan. We show that when there are factor-embodied exogenous influences on production, conventional estimation method of returns to scale will generate a biased estimate. However, in this situation, we prove that the estimator we use is still unbiased. Our empirical results indicate that constant returns to scale are prevalent, and there is some extent of market power in most industries. In addition, based on the unbiased property of this estimator, we propose a way to determine which representation of technical inefficiency, output-oriented or input-oriented, we should choose. Although the estimator of returns to scale in the stochastic frontier model depends on the choice of the inefficiency orientation, we find and prove that the unbiased estimator is unaffected and still valid. Hence we will compare the estimation results from the stochastic frontier model with those from the unbiased estimator to examine which inefficiency orientation would match empirical data more reasonably.
Subjects
Returns to Scale
Markups
Unbiased estimator
Technical inefficiency
Stochastic frontier model
Taiwan manufacturing industries
Type
thesis
File(s)![Thumbnail Image]()
Loading...
Name
ntu-99-R97323048-1.pdf
Size
23.53 KB
Format
Adobe PDF
Checksum
(MD5):2eddd005608859d9bc24e9f694d024d3