Traditional Culture Encyclopedia - Traditional stories - Why do SBM models generally use constant returns to scale?
Why do SBM models generally use constant returns to scale?
The macro production function has certain linear properties.
The equivalence between competitive equilibrium and "existence of an aggregate production function" has also been established, thus greatly simplifying the complex model.
It is precisely because of this that most production functions in macroeconomics have CRS properties, such as the commonly seen Cobb-Douglas.
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