Inefficiency by a Non-Minimum Cost Function for Gas Distribution Industry in Japan

This paper presents estimates of the rate of scale economies and technical change in the gas distribution industry with rate of return regulation as firm level in Japan using a translog non-minimum cost function. The result bases on a sample of 9 privately owned firms for the period 1981-1995. Several results can be shown as follows. First, capital and energy are over-employed as input, while labor is under-employed as inputs. Second, increasing returns to scale does not exist. Third, technical progress of which degree is around 3%, is exist during the estimated period. Fourth, labor and energy input factors are not so responsive to change in thier own prices, while capital factor is responsive to change in its own price. Moreover, almost of all input ratios are not so sensitive to change in any given input price, except between labor or energy, and capital.