Scale economies and input substitution under a ray-homogeneous technology: Additional cross-section evidence

This paper posits a ray-homogeneous production function having elasticities of scale and substitution that are not constant but dependent upon the input mix. An estimable form is derived as a local approximation near the point at which the magnitude of the input vector is unity (the homogeneous Cobb–Douglas case). Evidence of both increasing and decreasing returns to scale emerges along with the finding that the elasticity of substitution lies significantly below unity in the majority of cases.