Returns to scale with a Cobb-Douglas production function for a small italian mechanical firm

with this piece of evidence, I try to she light upon the e ects of xed and variable costs on revenues for a rm operating in the sector of leathing and milling in the neighbourhood of Bologna, on the Tus- can - Emilian Appennines, through the estimation of a linear bivariate simultaneous equation model where variable and xed costs explain revenues; with a sample of eleven years of annual data, I nd that a marginal increase in variable costs of 1 euro, keeping the xed costs constants, leads to higher revenues up to 1.155 euro; I further estimate a cobb douglas production function, in order to nd out whether the returns to scale are increasing, constant or decreasing; I nd support for the hypothesis of slightly increasing returns to scale with the base- line cobb douglas transformed in logarithms (with capital and labour only), while multiplicatively including an additional regressor for raw materials purchases, I nd evidence for slightly decreasing returns to scale