Degree of Scale Economies and Congestion : A Unified DEA Approach

There are increasing concerns about how increase in congestion can adversely affect output as well as about the relative benefit-cost ratio or return on investment associated with alternative projects or policies to address those problems. Regardless of what policy strategies are used to address congestion, the fact remains that we cannot assess the economic benefits of congestion-reduction strategies unless we are able to measure the extent to which congestion affects productivity in general, and scale economies in particular. This paper makes a novel attempt to suggest a method in a non-parametric framework to measure scale elasticity in production in the presence of congestion