Decreasing or

constant returns to scale cause no inefficiency because there is simply no profitable arbitrage opportunity under these circumstances.

The fact that, especially, the Barro and Sala-i-Martin studies find evidence that is compatible with the assumption of

constant returns to scale is somewhat surprising, because it is almost an article of faith of regional economists that production is characterised by substantial internal and external (agglomeration) economies of scale (Krugman, 1992).

PROOF: By

constant returns to scale and [1], we have [Mathematical Expression Omitted].

There are nearly

constant returns to scale in outpatient care for system members, and increasing returns to scale for independent hospitals.

If

constant returns to scale are assumed, then a doubling of inputs results in the doubling of number of baccalaureate degrees conferred.

As suggested earlier, theory suggests that firms should operate on a production function at

constant returns to scale (Hall et al.

The residual TFP method assumes essentially

constant returns to scale and Hicks neutral technical change.

On the other hand, the total return to investment exhibits decreasing or

constant returns to scale, so |y.

In particular, the CCR model assumes

constant returns to scale, while the additive model allows for the possibility of constant (C), increasing (I) or decreasing (D) returns.

In spite of this, the true model used to generate the date is the simple

constant returns to scale model (1).

We have applied DEA under two possible returns to scale assumptions: (i)

Constant returns to scale, and (ii) Variable returns to scale.

DEA, a linear programming technique, was originally developed by Charnes, Cooper, and Rhoades (1978) with

Constant Returns to Scale (CRS) extended by Banker et al.