Abstract:
Increasing returns to scale (RTS) is frequently postulated as affecting productivity in surface coal mining. However, it is not clear whether increased capital intensity or increased output is the relevant phenomenon. A ray-homothetic production function that incorporates the capital-labor mix and fixed site geology into the scale elasticity is presented and estimated with a micro (mine level) dataset. The results indicate that higher capital intensity contributes to higher RTS for some types of capital equipment, but not all. On the average increasing RTS was found, with few mines approaching optimal scale.
