Abstract
This paper focuses in the existence of quasi-fixed inputs and externality in the dynamic factor demand model of cost function. At first, we shed light on the degree of scale economies including the quasi-fixed inputs and externality in both static and dynamic models by theoretically. The degree of scale economy in the dynamic model was already introduced by Morrison (1985) (Journal of Business & Economic Statistics) and Morrison/Siegel (1999) (American Economic Review) by geometrically, We introduce it by algebraically. Next, the dynamic factor demand model with quasi-fixed inputs and externality is empirically estimated using translog cost function of fixed effect panel model. The results of estimation give some consequences. (1) The signs of cost elasticity of stock other than network type, network type stock and externality represent the results, which are theoretically required. (2) The effect of the network type stock to the cost function is larger than that of the stock other than network type. (3) Externality, which supports the input factor, is effective to the decreasing of the total cost.
