Scale economy measures and subequilibrium impacts

Morrison(1985), Morrison and Siegel (1997) and Morrison and Schwartz (1994) have suggested using an expression for "total" scale or cost economies to disentangle determinants of cost efficiency, including short run subequilib rium effects. Fousekis (1998) has noted that the derivation of such an expr ession is based on imputation of the long run, which implicitly suggests ev aluation at steady state values. Measurement of elasticities imputing value s not observed in the data, however, invariably requires some type of appro ximation. The Fousekis approach represents one view of the relevant approxi mation, which is not conceptually appropriate for most applications, and di sallows evaluation of the implied adjustment process to long run values. Th is article highlights the underlying assumptions that raise questions about this approach, and overviews alternative approaches to and rationales for computing these types of elasticity estimates.