Production Costs, Scale Economies and Technical Change In U.S. Textile and Apparel Industries*

The production-cost structure of the U.S. textile industry is examined using a dual cost framework. A translog cost function is used to measure substitution elasticities between inputs, scale economies and the nature of technical change. The scope for factor substitution in textiles remains limited with all substitution elasticities being less than unity. Labor and materials are complements in apparel production, but there is evidence of substitution between capital and labor. The rate of technical change is higher in textiles than in apparel. Given the intense import competition from low wage countries, in both industries technical progress is labor saving. Overall economies of scale are larger in apparel, however, scale economies have continued to increase in textiles