A MULTIPRODUCT SYMMETRICAL GENERALIZED MCFADDEN COST FUNCTION

This paper introduces a flexible multiproduct cost function that permi ts zero values of one or more of the outputs and can impose restrictio ns quite easily, if not automatically satisfied, to ensure global conc avity property. It satisfies linear homogeneity (in prices) property a nd is flexible in the output space. Thus the function is ideal for est imating, for example, economies of scope, cost complementarity, produc t-specific returns to scale, etc., without worrying about zero values of output(s) and extrapolations to points far from the point of approx imation. As an empirical application, we use panel data (1978-1985) on 12 Finnish foundry plants to estimate technical progress, overall ret urns to scale, product-specific returns to scale and economies of scop e.