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Direct and Indirect Measures of Capacity Utilization: A Nonparametric Analysis of U.S. Manufacturing

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Author Info
Subhash C. Ray (University of Connecticut)
Kankana Mukherjee (Worcester Polytechnic Institute)
Yanna Wu (PricewaterhouseCoopers LLP)

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Abstract

We measure the capacity output of a firm as the maximum amount producible by a firm given a specific quantity of the quasi-fixed input and an overall expenditure constraint for its choice of variable inputs. We compute this indirect capacity utilization measure for the total manufacturing sector in the US as well as for a number of disaggregated industries, for the period 1970-2001. We find considerable variation in capacity utilization rates both across industries and over years within industries. Our results suggest that the expenditure constraint was binding, especially in periods of high interest rates.

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File URL: http://www.econ.uconn.edu/working/2005-36.pdf
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Publisher Info
Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2005-36.

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Length: 36 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:uct:uconnp:2005-36

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Related research
Keywords: Data envelopment analysis; expenditure constraint; indirect production function;

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Find related papers by JEL classification:
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
L6 - Industrial Organization - - Industry Studies: Manufacturing

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References listed on IDEAS
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.:
  1. 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. [Downloadable!] (restricted)
  2. H. Kim, 1999. "Economic Capacity Utilization and its Determinants: Theory and Evidence," Review of Industrial Organization, Springer, vol. 15(4), pages 321-339, December. [Downloadable!] (restricted)
  3. Morrison, Catherine J, 1985. "Primal and Dual Capacity Utilization: An Application to Productivity Measurement in the U.S. Automobile Industry," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 312-24, October.
  4. Lawrence R. Klein, 1958. "The Measurement of Capacity," Cowles Foundation Discussion Papers 49, Cowles Foundation, Yale University. [Downloadable!]
  5. Nelson, Randy A, 1989. "On the Measurement of Capacity Utilization," Journal of Industrial Economics, Blackwell Publishing, vol. 37(3), pages 273-86, March. [Downloadable!] (restricted)
  6. Fare, Rolf & Grosskopf, Shawna & Kokkelenberg, Edward C, 1989. "Measuring Plant Capacity, Utilization and Technical Change: A Nonparametric Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(3), pages 655-66, August. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Walter Briec & Kristiaan Kerstens & Diego Prior, 2009. "Tangency Capacity Notions Based upon the Pro?t and Cost Functions: A Non-Parametric Approach and a Comparison," Working Papers 2009-ECO-05, IESEG School of Management. [Downloadable!]
  2. Sudipto Sarkar, 2009. "A real-option rationale for investing in excess capacity," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(2), pages 119-133. [Downloadable!]
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This page was last updated on 2009-10-28.

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