A cost-based analysis of scale economies in the French auto industry |
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| Institution: | 1. INTEC (UNL – CONICET), Güemes 3450, 3000 Santa Fe, Argentina;2. Department of Chemical Engineering, Carnegie Mellon University, Pittsburgh, PA 15213, USA;1. Department of Accounting, London School of Economics and Political Science, Houghton St, WC2A 2AE London, UK;2. School of Banking and Finance, Università Cattolica del Sacro Cuore, Largo Gemelli 1, 20123 Milan, Italy;3. Università Cattolica del Sacro Cuore, Largo Gemelli 1, 20123 Milan, Italy;1. Department of Economics, Rutgers University, United States;2. Research Department, Federal Reserve Bank of Philadelphia, United States;3. Finance Department, The Wharton School, University of Pennsylvania, United States |
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| Abstract: | This paper examines cost relationships in the French automobile industry using a translog cost function with domestic capital and labor and domestic and foreign intermediate goods inputs. The findings suggest scale economies at lower output levels, but diseconomies at mean and maximum output levels. Cross price elasticity estimates implied all input pairs except capital and foreign parts and labor and domestic parts are substitutes. Except for foreign components, direct price elasticity estimates were inelastic. Thus, further integration of Europe and reduction of foreign input prices may substantially increase their quantity demanded and decrease the demand for domestic labor and parts. |
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