Events

Dr. Devesh R. Raval
Bureau of Economics
Federal Trade Commission

The dominant theoretical explanation for the existence of large, multi-product producers is economies of scope arising from common inputs across production lines of business. I assess the degree of economies of scope using data from the FTC’s Line of Business surveys, which provide information on inputs at the line of business level as well as common inputs to the firm. I estimate a production function allowing for common inputs and find substantial economies of scope; eliminating the common input would reduce output by 11% for the average firm.