Abstract

The paper deals with the common allegation that economies characterized by increasing returns of scale are suboptimally populated. Although increasing returns is a necessary condition for suboptimal population, it is demonstrated that it is not sufficient. Furthermore, a more stringent necessary condition is available, i.e., the degree of returns to scale must exceed one plus the capital share for the economy. This necessary condition may also be employed as a test of sufficiency for overpopulation. In the light of this criterion, it is suggested that the incidence of suboptimal population has been overestimated.

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