Economies of Scale in Esfahan Steel Mill Plant

Steel industry is considered as one of the most important component of industrialization, and most of the developing countries wish to have prosperous steel plants. Despide po ssessing a good potential inenergy, mineral and human resources, we do not yet enjoy a major share in the world steel trade. Based on favorable economic returns in steel industries, we would expect to profit from our comparative advantages. In this research we examine the factors which reduce the production costs, and we try to identify the most suitable cost functions. Our model consists of translog cost functions, and show how the Esfahan steel mill could profit from the economies ofscale. Through the "Iterative seemingly Unrelated Regrenions", we observed that this plant may ha ve considerable economies of scale.