Measuring Economies of Scale, X-inefficiency,Welfare Costs of Monopoly in Selected Iranian Industries

Rasekhjahromi, Erfaneh; Ebrahimi, Mehrzad; Zare, Hashem

doi:10.22034/ijts.2026.2084194.4241

Measuring Economies of Scale, X-inefficiency,Welfare Costs of Monopoly in Selected Iranian Industries

Document Type : Regular Papers

Authors

erfaneh rasekhjahromi ¹

mehrzad ebrahimi ²

hashem zare ³

¹ Department of Economics, Shi.C., Islamic Azad University, Shiraz, Iran.2470887682@iau.ir

² ,Department of Economics, Shi.C., Islamic Azad University, Shiraz, Iran

³ Department of Economics, Shi.C., Islamic Azad University, Shiraz,Iran

10.22034/ijts.2026.2084194.4241

Abstract

This study aims to measure economies of scale, welfare costs arising from monopoly, and the extent of
X-inefficiency over the period from 2002 to 2022. The study uses panel data from 38 industries, employing
the Liebenstein-Comanor method to calculate the welfare costs of monopoly and a Translog cost function to
estimate X-inefficiency and economies of scale. The findings indicate three structural crises. First, economies
of scale have followed a downward trend and declined to one-quarter of their peak value (0.029 in 2012) by
2022, indicating a loss of the advantages of large-scale production. Second, the welfare cost of monopoly
has increased progressively and nearly doubled over the two-year period from 2020 to 2022. This cost is
mainly concentrated in basic industries such as steel, automotive, and petrochemicals. Third, X-inefficiency
(resource waste within firms) has followed an upward trend, increasing from 0.301 to 0.351, which indicates
a worsening of managerial inefficiency. Accordingly, the article emphasizes separating firms with market
power, expanding public ownership through public investment funds, and improving price transparency as
measures to reduce monopoly. At the same time, it considers smart mergers and the clustering of small and
medium-sized enterprises as mechanisms for strengthening economies of scale and enhancing industrial

Keywords

Monopoly

X-inefficiency

Welfare Costs of Monopoly

Economies of Scale

Selected Industries of Iran

Subjects

اقتصاد سنجی

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