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The allocative consequences of economies of scale (English)

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  • The allocative consequences of economies of scale (English)
  • Westphal, Larry E.; Rhee, Yung W.
  • World Bank (WB)


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Title The allocative consequences of economies of scale (English)
Similar Titles
Material Type Reports
Author(English)

Westphal, Larry E.; Rhee, Yung W.

Publisher

World Bank (WB)

Date 1976
Language English
File Type Link
Subject Social Development < Education

Abstract

A static, mixed integer programming model of the mechanical engineering sector is used to address the question of whether interdependence due to economies of scale matters. This model was originally constructed as a device to obtain an initial comparative advantage ranking of production activities prior to the design of specific projects in the Republic of Korea. Here, it is employed, first, to measure numerically the degree of increasing returns and the nature of interdependence within the sector and, second, to estimate the cost of neglecting interdependence when planning resource allocation. The paper concludes that the allocative consequences of economies of scale are far less significant than has probably been supposed, but that they are nonetheless great enough to warrant the use of programming methods rather than conventional benefit-cost project appraisal techniques.