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Factor utilization and margins for adjusting output: evidence from manufacturing plants

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  • Joe Mattey
  • Steven Strongin
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    Abstract

    This paper describes patterns of factor utilization and output adjustment at the plant level for a wide range of manufacturing industries. We explain why manufacturing plants may differ quite a bit in how they accomplish output adjustments, depending on shutdown cost aspects of technology. Assembly-type operations with low shutdown costs would primarily vary the work period of the plant, whereas continuous processing plants with large shutdown costs would adjust instantaneous flow rates of production. For larger output increases, a lengthening of the work period by assemblers would entail employment changes, whereas continuous processors would be more apt to relax physical capital constraints. We use micro survey data on the organization of actual and capacity plant operations to describe the observed patterns of adjustment in individual manufacturing industries and find substantial heterogeneity across industries. For manufacturing as a whole, the work-week appears to be a significant margin of adjustment.

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    Bibliographic Info

    Article provided by Federal Reserve Bank of San Francisco in its journal Economic Review.

    Volume (Year): (1997)
    Issue (Month): ()
    Pages: 3-17

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    Handle: RePEc:fip:fedfer:y:1997:p:3-17:n:2

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    Related research

    Keywords: Industrial capacity ; Productivity ; Manufactures;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Basu, Susanto, 1996. "Procyclical Productivity: Increasing Returns or Cyclical Utilization?," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 719-51, August.
    2. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1995. "Capital Utilization and Returns to Scale," NBER Working Papers 5125, National Bureau of Economic Research, Inc.
    3. Lawrence R. Klein, 1958. "The Measurement of Capacity," Cowles Foundation Discussion Papers 49, Cowles Foundation for Research in Economics, Yale University.
    4. Bresnahan, Timothy F & Ramey, Valerie A, 1994. "Output Fluctuations at the Plant Level," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 593-624, August.
    5. Maloney, Michael T & McCormick, Robert E, 1983. "A Theory of Cost and Intermittent Production," The Journal of Business, University of Chicago Press, vol. 56(2), pages 139-53, April.
    6. repec:att:wimass:9116 is not listed on IDEAS
    7. Matthew D. Shapiro, 1996. "Macroeconomic Implications of Variation in the Workweek of Capital," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 79-134.
    8. Shea, John, 1993. "Do Supply Curves Slope Up?," The Quarterly Journal of Economics, MIT Press, vol. 108(1), pages 1-32, February.
    9. Carol Corrado & Joe Mattey, 1997. "Capacity Utilization," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 151-167, Winter.
    10. Mattey, Joe & ten Raa, Thijs, 1997. "Primary versus Secondary Production Techniques in U.S. Manufacturing," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(4), pages 449-64, December.
    11. Ana M. Aizcorbe, 1994. "Plant shutdowns, compositional effects, and procyclical labor productivity: the stylized facts for auto assembly plants," Finance and Economics Discussion Series 94-13, Board of Governors of the Federal Reserve System (U.S.).
    12. Joe Mattey & Steve Strongin, 1995. "Factor utilization and margins for adjusting output: evidence from manufacturing plants," Finance and Economics Discussion Series 95-12, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:
    1. Šustek, Roman, 2011. "Plant-level nonconvex output adjustment and aggregate fluctuations," Journal of Monetary Economics, Elsevier, vol. 58(4), pages 400-414.
    2. Daniel Ryan, 2000. "Fluctuations in productivity growth rates and input utilization in U.S. manufacturing," Atlantic Economic Journal, International Atlantic Economic Society, vol. 28(2), pages 150-163, June.
    3. Sustek, Roman, 2009. "Nonconvex Margins of Output Adjustment and Aggregate Fluctuations," MPRA Paper 17486, University Library of Munich, Germany.
    4. Andreas Hornstein, 2002. "Towards a theory of capacity utilization: shiftwork and the workweek of capital," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 65-86.
    5. Humphreys, Brad R., 2001. "The behavior of manufacturers inventories: Evidence from US industry level data," International Journal of Production Economics, Elsevier, vol. 71(1-3), pages 9-20, May.

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