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Structural constraints and excess capacity: an international comparison of manufacturing firms

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  • Hulya Dagdeviren

Abstract

type="main" xml:id="dpr12168-abs-0001"> Excess capacity results in real and opportunity costs as well as lower factor productivity. Conventionally, variation in capacity utilisation rates has been explained with reference to the business cycles and market imperfections. In this article, we show that these two factors do not always fully explain the causes of idle capacity. Our findings suggest that manufacturing firms in low-income countries tend to have lower capacity utilisation (CU) rates than those in middle- and upper-middle-income groups. To explain this peculiarity, it is proposed in this article that the level of excess capacity partly depends on supply-side conditions and institutional variables. The findings provide strong support for this view and suggest that there are gains to be made in the manufacturing industries of the lower-income countries through improvements in the structural conditions.

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  • Hulya Dagdeviren, 2016. "Structural constraints and excess capacity: an international comparison of manufacturing firms," Development Policy Review, Overseas Development Institute, vol. 34(5), pages 623-641, September.
    • Handle: RePEc:bla:devpol:v:34:y:2016:i:5:p:623-641
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    File URL: http://hdl.handle.net/10.1111/dpr.2016.34.issue-5
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    Cited by:

    1. Cheng, Bo & Christensen, Tom & Ma, Liang & Yu, Junli, 2021. "Does public money drive out private? Evidence from government regulations of industrial overcapacity governance in urban China," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 767-780.
    2. Wang, Delu & Wang, Yadong & Song, Xuefeng & Liu, Yun, 2018. "Coal overcapacity in China: Multiscale analysis and prediction," Energy Economics, Elsevier, vol. 70(C), pages 244-257.
    3. Wang, Delu & Wan, Kaidi & Song, Xuefeng, 2018. "Quota allocation of coal overcapacity reduction among provinces in China," Energy Policy, Elsevier, vol. 116(C), pages 170-181.
    4. Wang, Zhan-ao & Zheng, Chengsi, 2022. "Is technological innovation the cure for overcapacity? Exploring mediating and moderating mechanisms," Journal of Business Research, Elsevier, vol. 147(C), pages 348-361.

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