On Estimating Optimal Alpha-Returns to Scale

Abstract : From a theoretical point of view, -returns to scale is a relevant alternative to traditional DEA models for estimating production technologies under global returns to scale assumptions such as strictly increasing or strictly decreasing returns to scale. However, from a methodological and empirical point of view, a remaining question is the estimation of . This contribution proposes an effective methodology to estimate an optimal value of based upon a goodness-of-fit strategy. A global method using a grid search is presented first. Second, for generalised FDH technologies, a minimum extrapolation principle is developed to estimate directly the optimal -returns from a linear program. An illustration on 63 US industries over the period 1987-2012 shows the relevancy of our approach.