EVALUATING ECONOMIES OF SCALE IN THE TEXTILE, APPAREL, AND ACCESSORIES INDUSTRY

Shubha Bennur
D.K. Malhotra
Thomas Jefferson University

ABSTRACT

This study investigates economies of scale in the textile, apparel, and accessories industry
from 2015 to 2019, using a translog cost function model to evaluate the cost efficiencies of 35
textile, apparel, and accessories companies. Company size was measured by total assets managed.
We also analyzed the source of cost efficiencies with cost measured by cost of goods sold, other
operating costs, and selling, as well as general and administrative expenses concerning the
company’s total assets. On average, larger companies had lower cost of goods sold and operating
expenses. Also, cost efficiencies were not equally distributed; some companies showed substantial
cost efficiencies while others exhibited none or even diseconomies of scale as size increased.

Keywords: economies of scale, translog cost function, textile, apparel, and accessories industry