Skip to main content
SpringerLink
Log in

Marginal and total production cost indices: Theory and applications

  • Published:
Journal of Productivity Analysis Aims and scope Submit manuscript

Abstract

We show that the total cost of production index and the marginal cost of production index may be used to illuminate the course of an industry's evolution. Each of these summary statistics conveys different bits of information about the industry. Theoretical properties of the indices are compared, and then the indices are applied to data from the steel industry to illustrate how changes in the indices over time reflect fundamental changes in industry conditions.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Baye, M.R., and D.A. Black. (1986). Consumer Behavior, Cost of Living Measures, and the Income Tax. Berlin: Springer-Verlag.

    Google Scholar 

  • Deily, M.E. (1988a). “Investment Activity and the Exit Decision.” Review of Economics and Statistics 70(4), 595–602.

    Google Scholar 

  • Deily, M.E. (1988b). “Exit Barriers in the Steel Industry.” Federal Reserve Bank of Cleveland Economic Review. 24(1), 10–18.

    Google Scholar 

  • Deily, M.E. (forthcoming). “Exit Strategies and Plant-Closing Decisions: The Case of Steel.” Rand Journal of Economics. Forthcoming.

  • Deily, M.E., and D.W. Jansen. (1989). “Factor Adjustment Costs at the Industry Level.” Federal Reserve Bank of Cleveland Working Paper. No. 8911. September.

  • Diewert, W.E. (1982). “Duality Approaches to Microeconomic Theory.” In Handbook of Mathematical Economics II. K. Arrow and M. Intriligator, (eds.), Amsterdam: North Holland.

    Google Scholar 

  • Eichhorn, W. and J. Voeller. (1970). Theory of the Price Index. Berlin: Springer-Verlag.

    Google Scholar 

  • Färe, R. and C.A.K. Lovell. (1984). “Affinitely Homothetic Production Technology.” Methods of Operations Research 48, 197–205.

    Google Scholar 

  • Fisher, I. (1922). The Making of Index Numbers. Boston: Houghton Mifflin.

    Google Scholar 

  • Hansen, Lars Peter. (1982). “Large-Sample Properties of Method of Moments Estimators.” Econometrica 50, 1029–54.

    Google Scholar 

  • Hansen, Lars Peter, and Kenneth Singleton. (1982). “Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models.” Econometrica 50, 1269–86.

    Google Scholar 

  • Karlson, Stephen H. (1983). “Modeling Location and Production: An Application to U.S. Fully-Integrated Steel Plants.” Review of Economics and Statistics 65(1), 41–50.

    Google Scholar 

  • Pindyck, Robert S., and Julio J. Rotemberg. (1983). “Dynamic Factor Demands and the Effects of Energy Price Shocks.” American Economic Review 73(5), 1066–1079.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Economics, The Pennsylvania State University, and Center for Economic Research, USA

    Michael R. Baye

  2. Department of Economics, Lehigh University, USA

    Mary E. Deily

  3. Department of Economics, Texas A&M University, USA

    Dennis W. Jansen

Authors
  1. Michael R. Baye
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Mary E. Deily
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Dennis W. Jansen
    View author publications

    You can also search for this author in PubMed Google Scholar

Additional information

The refereeing process of this paper was handled through W. Eichhorn.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Baye, M.R., Deily, M.E. & Jansen, D.W. Marginal and total production cost indices: Theory and applications. J Prod Anal 2, 91–102 (1991). https://doi.org/10.1007/BF00156340

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/BF00156340

Keywords

Search

Navigation