PRODUCTION-FUNCTIONS WITH FACTOR-ORIENTED SCALE SENSITIVITY

It is not unreasonable to believe that most, if not all, important inn ovations are embodied in an industry's capital stock. The notion that the efficiency of large scale of production is brought about mainly by a larger size capital stock or a more advanced one is not new. The pu rpose of this paper is to search for production functions that allow t he scale elasticity to vary with respect to capital stock and, at the same time, contains desirable properties of diminishing returns to lab or and/or factor substitutability. There are numerous SSWK production functions. However, the objectives of this paper are to, first of all, find a general way to generate the SSWK production functions, and sec ondly, to find those SSWK's with certain desirable properties.