Estimation of the Translog Cost Function and Parametric Measurement of Economies of Scale in Selected Industries

Document Type : applicative

Authors

1 Faculaty Member of Economics, Pnu University, Department of Economics,

2 Department of Economics, SHI.C., Islamic Azad

10.30473/jier.2026.76607.1526

Abstract

The industrial sector in Iran faces structural challenges, including high concentration and monopoly. This study aims to measure economies of scale in selected Iranian industries using a translog cost function over the period 2002–2022 (1381–1401 in the Iranian calendar). The research methodology is based on a parametric approach, employing panel data from 38 industries classified under four-digit ISIC codes provided by the Statistical Center of Iran. The model was estimated using the seemingly unrelated regression (SUR) method, while unit root and cointegration tests were applied to assess data stability. The findings indicate that the average economies of scale in the industrial sector have followed a declining trend. This index rose from 0.0083 in 2002 to a peak of 0.029 in 2012, but subsequently decreased to 0.002 in 2022. This reflects the gradual loss of advantages associated with large-scale production. Among industries, non-ferrous metal casting recorded the highest economies of scale at 0.083 in 2012, while the food industry exhibited the lowest. The downward trend in economies of scale may be attributed to factors such as inefficient capacity utilization, downsizing of factories, rising marginal costs, and intensifying external constraints.

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Journal of Industrial Economics researches
Volume 9, Issue 33
October 2025

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History

  • Receive Date: 23 November 2025
  • Revise Date: 18 January 2026
  • Accept Date: 27 April 2026

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