The estimation of a set of cost functions for a sample of the Maltese bakery industry : a microeconomic exercise

Abstract

The industrial dispute that occurred in February 1977 between the Government and the manufacturers of the so-called 'Maltese' bread, led to a cost-accountancy study by the bakers involved, to serve as a backing to their claims. This dissertation has as its foundation, the bakers' study which was very generously lent to me by the President of the Bakers and Breadsellers Union. This dissertation starts off with a brief outline of the Maltese Bakery industry, tracing the effects brought about by the change in the price of flour- the most important raw material. Chapter 2 deals with the data used, identifying different types of cost, and tabulating the different cost items used in the following chapter. Furthermore, this chapter estimates the average cost per loaf calculated from the data, and compares this with the cost as estimated by the bakers and that deemed right by the Government. Chapter 3 shows the results of multiple, linear, cross sectional analyses on a sample of 20 bakeries carried out on the data as presented in the previous chapter, and gives the best-fitting equation of each type of cost item identified. The remainder of the dissertation is, in effect a microeconomic exercise, making use of microeconomic theory and the regression best-fitting equations obtained in deriving total, average and marginal costs. Elasticities are also calculated and a discussion on economies of size and returns to scale follows. Thus, the dissertation may be broadly divided into three parts: 1) a descriptive part; 2) a regression analysis part; 3) a microeconomic part. The latter parts rest on a mathematical framework. To leave the work uncluttered with details, the actual regression and mathematical workings, have been left out. However, the appendices at the end of this work, contain the regression theory used and various mathematical derivations - the results of which are used in the last chapters of this dissertation.