Abstract
AbstractUsing 1930s panel data from Osaka City, we estimate the production function in the metal and machinery sectors in Japan to identify the factors that influence the establishment of mass‐production methods. Subcontracting income per total revenue had a positive correlation with metal and machinery output. While material‐intensive technology was used, scale‐economy‐type technology was not observed in this sector. The greater return on capital for smaller plants was attributed to efficient capital stock utilisation and subsistence wages. The division of labour between firms, through which materials and parts were traded, contributed to output expansions in the 1930s.
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