Returns of scale financial definition of Returns of scale
returns to scale (redirected from Returns of scale)
returns to scale the relationship between OUTPUT of a product and the quantities of FACTOR INPUTS used to produce it in the LONG RUN. Where, for example, doubling the quantity of factor inputs used results in a doubling of output then constant returns to scale’ are experienced. Where ECONOMIES OF SCALE are present, a doubling of factor inputs results in a more than proportionate increase in output. By contrast, where DISECONOMIES OF SCALE are encountered, a doubling of factor inputs results in a less than proportionate increase in output.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive
The null hypothesis of constant returns of scale
in the pre-reforms period is rejected at 12.97%, while we do not reject this null for the post-reforms period.
(If there is no induced technical progress and [Alpha] = [Beta], a Verdoorn coefficient of 0.10 implies returns of scale
of 1.05.) Using the same data and estimating the dynamic Verdoorn law gave the traditional value of 0.5.
It may be due to the reason that DMUs that were efficient under Constant Returns of Scale
(CRS) were accompanied by new efficient DMUs that could operate under increasing or decreasing returns to scale.