Estimates of scale economies in the garment industry in Nepal

Abstract

Using plant level data from 1992 census and from 1997 census of manufacturing establishments in Nepal, a simple cubic cost function and a more general translog cost function are examined for the garment industry of Nepal. Homothetic, homogeneous and Cobb-Douglas cost functions are also estimated by imposing some appropriate restrictions on translog cost function. The study suggests that the industry has an increasing returns to scale over the current production range. Most of the firms have not been able to exploit the economies of scale in this industry.