Factor substitution, and economies of scale and utilisation in Kuwait's crude oil industry

Al-Mutairi, Naief; Burney, Nadeem A.

doi:10.1016/s0140-9883(02)00008-7

Cited by 12 publications

(7 citation statements)

References 26 publications

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“…All production factors are variable in the long‐run cost function defined in . Therefore, as argued in Al‐Mutairi and Burney [], it is implicitly assumed that the firms are in a static equilibrium. This ensures an optimal combination of factors, in the sense that it minimizes production cost.…”

Section: Specification Of the Analytical Modelmentioning

confidence: 99%

Economic analysis of the water demand in the hotels and restaurants sector: Shadow prices and elasticities

Angulo

Atwi

Ortí

et al. 2014

Water Resources Research

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Despite the growing economic importance of tourism, and its impact on relative water shortage, little is known about the role that water plays in the productive process of hotels and restaurants and, therefore, the possible implications of water demand management policy for this sector. This study aims to fill this gap. It is based on the microdata of 676 firms in the sector, operating in the city of Zaragoza (Spain) for a 12 year period. Based on the Translog cost function, we estimate the shadow price of water in the short run and, from a long-run perspective, its direct price elasticity, its cross elasticities relative to labor, capital, and supplies, and its elasticity with respect to the level of output. The results obtained show that water provides sector firms returns that are on average higher than its price, although in the case of hotels the margin is really narrow. This situation provides policy makers with a margin for applying price increases without affecting the sector's viability, with some caution in the case of hotels. Water demand elasticity equals 20.38 in the case of hotels, but it is not significant in the case of restaurants and bar-cafes; hence, only in hotels is there potential for influencing water use patterns, encouraging the resource's conservation through pricing policy. Moreover, capital is a substitutive factor of water, and the elasticity of water with respect to output is 0.40, all of which should also be considered by policy makers in water resource management.

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Section: Specification Of the Analytical Modelmentioning

confidence: 99%

Economic analysis of the water demand in the hotels and restaurants sector: Shadow prices and elasticities

Angulo

Atwi

Ortí

et al. 2014

Water Resources Research

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“…absence of economies or diseconomies of scale in Kuwait's refining industry) are not consistent with the earlier studies. While a number of studies have investigated various issues related to the petroleum refining industry, only Lynk (1986), Shoesmith (1988), Truett and Truett (1998), and Al-Mutairi and Burney (2002) have used translog cost functions to address the issues of input substitution and economies of scale in the petroleum industry. 16 Lynk (1986) found that the technology of the UK refining industry is characterised by fixed proportion in input usage and economies in the use of capital services.…”

Section: Table I Estimated Coefficients Of the Different Versions Of mentioning

confidence: 99%

“…17 Based on the results, they concluded that it would be possible to privatise each of the three branches of the Mexican petroleum industry. For Kuwait, Al-Mutairi and Burney (2002) examined the production of crude oil industry (extraction) and found that the industry exhibits diseconomies of scale.…”

Section: Table I Estimated Coefficients Of the Different Versions Of mentioning

confidence: 99%

“…For instance, Al-Mutairi andBurney (2002) examined the issues of factor substitution and economies of scale in Kuwait's crude oil industry by estimating translogarithmic cost function.5 The translog cost function has been introduced byChristensen et al (1973). In the empirical literature, it has been extensively used to analyse characteristics of production structures in different sectors, particularly manufacturing.…”

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Petroleum Refining Industry: An Assessment of Its Production Structure*

Mohammed

Burney

2006

Australian Economic Papers

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Cost structure of petroleum refining industry in Kuwait has been examined, with specific focus on factor substitution, and economies of scale and utilisation. This has been done by estimating translog cost functions, both long-run and short-run, using annual time-series data covering the period from 1976 to 1998. The results indicate that the implied production structure is non-homothetic, and the pattern of scale effect is labour and capital saving but material using. The evidence also supports presence of induced exogenous technical change, which is non-neutral (labour and capital using, and material saving). The elasticity of substitution between capital and labour is negative, implying that the two inputs are complements. The results also indicate absence of economies and diseconomies of scale in the petroleum refining industry.

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“…Previous literature provides a number of elasticity estimates emanating from different context and methods (e.g., Arrow et al 1961;Mundlak 1968;Berndt and Christensen 1973b;Berndt and Wood 1975;Lopez 1984;Yohe 1984;Goel 1990;Karagiannis et al 1996;Kemfert 1998;Mutairi and Burney 2002;Kaas and Thadden 2003). For U.S agriculture Binswanger (1974a) reports an elasticity of substitution of 0.85 between labor and machinery.…”

Section: Introductionmentioning

confidence: 99%

The Influence of Labor Price Change on Agricultural Machinery Usage in Chinese Agriculture

Liu

Jetté‐Nantel

et al. 2013

Canadian J Agri Economics

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The substitution between rural labor and machinery has been a key determinant of farm production, structure, and efficiency in most developed countries and is expected to play a key role in shaping the future of Chinese agriculture. Using disaggregated farm-level data from Hebei and Shandong provinces of China, we calculated the Allen and Morishima elasticities of substitution between labor and machinery. These elasticities were based on seemingly unrelated regressions and three-stage least squares estimates of the translog cost function and input cost share functions. In contrast to previous studies, we dissaggregate machinery inputs into three categories: large, medium, and small. In addition, the issue of endogeneity in output quantity and input prices is also addressed. The results show strong evidence of substitution between labor and the three categories of machinery inputs. The findings also support substitution among the three categories of machinery themselves. La substitution entre la main-d'oeuvre agricole et la machinerie constitue un déterminant fondamental de la production, de la structure et de l'efficacité des exploitations agricoles dans la plupart des pays développés et elle devrait jouer un rôle clé dans l'évolution de l'agriculture chinoise.À l'aide de données désagrégées sur les exploitations agricoles situées dans les provinces chinoises de Hebei et de Shandong, nous avons calculé lesélasticités de substitution d' Allen et de Morishima entre les facteurs de la main-d'oeuvre et de la machinerie. Le calcul de cesélasticités est basé sur des régressions apparemment indépendantes (SUR) et sur la minimisation des moindres carrés en troisétapes (3SLS). Contrairement auxétudes antérieures, nous avons subdivisé la machinerie en trois catégories : grosse, moyenne et petite. Nous avonségalement examiné l'endogénéité de la quantité d'extrants et des prix des intrants. Les résultats de notreétude illustrent clairement la substitution entre la main-d'oeuvre et les trois catégories de machinerie et appuient aussi la substitution entre les trois catégories de machinerie.

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Factor substitution, and economies of scale and utilisation in Kuwait's crude oil industry

Cited by 12 publications

References 26 publications

Economic analysis of the water demand in the hotels and restaurants sector: Shadow prices and elasticities

Economic analysis of the water demand in the hotels and restaurants sector: Shadow prices and elasticities

Petroleum Refining Industry: An Assessment of Its Production Structure*

The Influence of Labor Price Change on Agricultural Machinery Usage in Chinese Agriculture

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