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The Italian Automotive Industry and Economies of Scale
Author(s) -
Truett Lila J.,
Truett Dale B.
Publication year - 2003
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1093/cep/byg014
Subject(s) - economies of scale , automotive industry , economics , factor price , capital (architecture) , capital good , scale (ratio) , economy , monetary economics , industrial organization , microeconomics , goods and services , engineering , physics , archaeology , quantum mechanics , history , aerospace engineering
This article investigates scale economies in the Italian automobile industry as well as substitution possibilities between inputs and direct and cross‐price elasticities of factor demand, utilizing a cost function with capital, labor, domestic, and imported intermediate goods inputs. Continuing European integration makes economies of scale an important issue. The study results are consistent with economies of scale in the Italian motor vehicle industry, a particularly interesting finding because the Italian automotive industry consists primarily of one firm, Fiat. The estimated direct price elasticities suggest that capital is most responsive to own price changes, and estimated cross elasticities imply that all inputs are substitutes. (JEL D 2, L 6, O 1)