Theory and Empirics of Cost Functions with Applications to Public Sector Pricing

This book is a collection of research on production technologies in industries and agriculture using flexible cost functions. It makes a significant contribution in three important but not unrelated areas. First, the duality property of cost and production functions is exploited to analyse allocative efficiency, technical change, and scale economies in production using cost functions. Second, the cost functions are extended to examine the cost saving and output enhancing effects of public capital infrastructure and trade openness in private sector industries. Third, using cost function estimates, issues related to designing of wheat procurement price and public sector prices for consumption and intermediary goods are examined. With this, the book consists of five parts. Part I discusses the theories of production, cost and public sector pricing. Part II provides a detailed analysis for selected industries in India. Part III analyses cost functions for the agricultural sector in India. Part IV shows how cost function-based input demand equations can be used in designing public sector commodity price policies for the manufacturing industries. Part V examines the effects of public capital infrastructure and trade openness on the cost structure and productivity in private sector industries in Australia and Canada. The book is useful for Masters and PhD students, researchers in economics and business, policy makers interested in the determination of cost-based prices of agricultural and industrial goods, and readers who want to know the benefits of infrastructural development in terms of cost saving.