Cookies?
Library Header Image
LSE Research Online LSE Library Services

Restricted cost functions and the rate of return to quasi-fixed factors, with an application to r&d and capital in the Bell system

Schankerman, Mark and Nadiri, M. Ishaq (1987) Restricted cost functions and the rate of return to quasi-fixed factors, with an application to r&d and capital in the Bell system. 1259. National Bureau of Economic Research, Cambridge, MA., USA.

Full text not available from this repository.

Abstract

This paper provides a statistical test to assess the adequacy of static equilibrium models. The test is based on a restricted cost function framework together with the envelope conditions which characterize static equilibrium for the quasi-fixed factors. We also show how restricted cost function models can be exploited to investigate some important issues such as the calculation of the rates of return to quasi-fixed factors, the determination of over- or underinvestment in particular assets, and the distinction between short run excess capacity and long run economies of scale. We provide an empirical application of these techniques to data on the Bell System for the period 1947-1976, treating the stocks of physical capital and of research and development (R&D) as quasi-fixed inputs. The results suggest that there was substantial overinvestment in capital and underinvestment in R&D compared to the static equilibrium levels, and that the rates of return to capital and R&D were about 4.5 and 10-15 percent, respectively.

Item Type: Monograph (Working Paper)
Official URL: http://www.nber.org
Additional Information: © 1987 M.Ishaq Nadiri and Mark Schankerman
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Sets: Collections > Economists Online
Departments > Economics
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 1259
Date Deposited: 28 May 2008 09:38
URL: http://eprints.lse.ac.uk/5108/

Actions (login required)

Record administration - authorised staff only Record administration - authorised staff only