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Vol. 6 No. 2 Dec 2011

Measurement of Returns to Scale in Tanning Process of Bangladesh

Dr. Md. Khalilur Rahmann Associate Professor, Department of Economics,
Asian University of Bangladesh, Uttara, Dhaka.


Leather and leather products significantly contribute both to domestic consumption and to export. The leather sector of Bangladesh has earned a special status in the national economy. We measured returns to scale in Tanning Process of Bangladesh. There are three stages of leather production e.g., Wet-blue, Crust, and Finished leather. Returns to scale for Wet-blue, Crust and Finished leather production are 1.01, 0.98, and 0.97 respectively. The coefficients are not significantly different from unity, suggesting that they operate under constant returns to scale. Thus, it may be inferred that there has been no substantial progress in the technology over the period of reference. Labor proves in the wet-blue and crust stages to be the most important production factor with larger relative share in comparison to capital. On the other hand Capital proves to be the most important production factor in the finished stage with larger relative share in comparison to Labor. So it is proper time to adopt a suitable leather policy to enhance our leather production up to increasing returns to scale.

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