S. Parrinello, RETURNS TO SCALE, EXTERNALITIES AND THE CHOICE OF TECHNIQUES, Manchester School of Economic and Social Studies, 65(3), 1997, pp. 328-341
It is argued that the method of comparison of techniques adopted by Sr
affa can be extended beyond the area of constant returns to scale or d
iminishing returns on land. The case of variable returns at the indust
ry level related to external diseconomies is investigated. It is shown
that, under the assumption of a gradual increase in demand at a given
uniform rate of profit, the choice of techniques by competitive firms
can be inefficient and this inefficiency affects income distribution
in a different way than the inefficiency arising in the case of extern
al economies.