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Maintenance

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  • Jonathan E. Leightner

    ()
    (Augusta State University)

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    Abstract

    Maintenance and production interact. The ideal way of accounting for this interaction, when estimating production functions, is by picking the temporal length of observations so that they embed integer multiples of the production—maintenance cycles for all inputs. In contrast to labor and land, the production—maintenance cycles of capital sometimes vary tremendously in temporal length, which can make it impossible to implement the ideal method of accounting for the interaction between maintenance and production. This paper empirically tests four second best methods of accounting for maintenance, when the ideal method is impossible. The output elasticities of all inputs (not just the input undergoing maintenance), which emerge from these tests, vary tremendously. This implies that the way that maintenance is incorporated into the analysis (including the standard approach of ignoring maintenance) drastically affects the profit maximizing combinations of inputs derived from production function estimations.

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    File URL: http://www.cema.edu.ar/publicaciones/download/volume4/leightner.pdf
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    Bibliographic Info

    Article provided by Universidad del CEMA in its journal Journal of Applied Economics.

    Volume (Year): IV (2001)
    Issue (Month): (May)
    Pages: 107-124

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    Handle: RePEc:cem:jaecon:v:4:y:2001:n:1:p:107-124

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    Related research

    Keywords: maintenance; efficiency; electricity; production and cost functions;

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    1. Geoffrey Rothwell & John Rust, 1995. "A Dynamic Programming Model of U.S. Nuclear Power Plant Operations," Microeconomics 9502001, EconWPA, revised 06 Feb 1995.
    2. Jorgenson, D.W., 1994. "Empirical Studies of Depriciation," Harvard Institute of Economic Research Working Papers 1704, Harvard - Institute of Economic Research.
    3. Triplett, Jack E, 1996. "Depreciation in Production Analysis and in Income and Wealth Accounts: Resolution of an Old Debate," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 93-115, January.
    4. Leightner, Jonathan E., 1999. "Weather-induced changes in the tradeoff between SO2 and NOx at large power plants," Energy Economics, Elsevier, vol. 21(3), pages 239-259, June.
    5. Jonathan E. Leightner & CA. Knox Lovell, 1998. "Weather and Pollution Abatement Costs," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 165-189.
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