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Nonparametric Measures of Capacity Utilization: A Dual Approach

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  • Subhash C. Ray

    (University of Connecticut)

Abstract

This paper develops a nonparametric method of obtaining the minimum of the long run average cost curve of a firm to define its capacity output. This provides a benchmark for measuring of capacity utilization at the observed output level of the firm. In the case of long run constant returns to scale, the minimum of the short run average cost curve is determined to measure short run capacity utilization. An empirical application measures yearly rates of capacity utilization in U.S. manufacturing over the period 1968-1998. Nonparametric determination of the short run average cost curve under variable returns to scale using an iterative search procedure is described in an appendix to this paper.

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File URL: http://web2.uconn.edu/economics/working/2002-35.pdf
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Bibliographic Info

Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2002-35.

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Length: 18 pages
Date of creation: Oct 2002
Date of revision:
Handle: RePEc:uct:uconnp:2002-35

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Web page: http://www.econ.uconn.edu/
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  1. Matthew D. Shapiro, 1989. "Assessing the Federal Reserve's Measures of Capacity and Utilization," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 181-242.
  2. Berndt, Ernst R & Morrison, Catherine J, 1981. "Capacity Utilization Measures: Underlying Economic Theory and an Alternative Approach," American Economic Review, American Economic Association, vol. 71(2), pages 48-52, May.
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Cited by:
  1. Kamel HELALI & Maha KALAI, 2013. "Direct and indirect measures of capacity utilization and Economic growth: A nonparametric analysis of the Tunisian industry," E3 Journal of Business Management and Economics., E3 Journals, vol. 4(6), pages 144-155.

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