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Capacity Utilization in Indian Paper Industry

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  • Kaustuva Barik

    (Indira Gandhi National Open University)

Abstract

The study estimates the rate of capacity utilization for the Indian paper industry for the period 1973-74 to 1997-98 on the basis of the theoretical framework of variable cost function. It is based on the basic premise that deviation from full utilization of capacity takes place as the levels of certain inputs, particularly capital, are fixed in the short-run and thus can be changed only in the long-run. In order to meet the increase (decrease) in demand, the industry puts the existing capital to more (less) intensive use. The study undertakes empirical estimation of a translog variable cost function by considering three variable inputs, viz., labour, energy and raw material and one quasi-fixed input, capital, on the basis of aggregate industry level data taken from annual survey of industries. It is found that under- utilization of capacity prevails in the Indian paper industry and there has been a decline in the rate of capacity utilization over time.

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File URL: http://128.118.178.162/eps/mic/papers/0503/0503001.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Microeconomics with number 0503001.

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Length: 20 pages
Date of creation: 01 Mar 2005
Date of revision:
Handle: RePEc:wpa:wuwpmi:0503001

Note: Type of Document - pdf; pages: 20
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Web page: http://128.118.178.162

Related research

Keywords: economic capacity utilization; equilibrium capital stock; Indian paper industry; temporary equilibrium; translog variable cost function;

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  1. Lawrence R. Klein, 1958. "The Measurement of Capacity," Cowles Foundation Discussion Papers 49, Cowles Foundation for Research in Economics, Yale University.
  2. Morrison, Catherine, 1988. "Subequilibrium in the North American Steel Industries: A Study of Short Run Biases from Regulation and Utilisation Fluctuations," Economic Journal, Royal Economic Society, vol. 98(391), pages 390-411, June.
  3. Morrison, C. J. & Berndt, E. R., 1981. "Short-run labor productivity in a dynamic model," Journal of Econometrics, Elsevier, vol. 16(3), pages 339-365, August.
  4. Hazilla, Michael & Kopp, Raymond J., 1986. "Testing for separable functional structure using temporary equilibrium models," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 119-141.
  5. Morrison, Catherine J, 1988. "Quasi-Fixed Inputs in U.S. and Japanese Manufacturing: A Generalized Leontief Restricted Cost Function Approach," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 275-87, May.
  6. Reghubendra, J. & Murty, M.N. & Paul, S. & Rao, B.B., 1992. "An Analysis of Technological Change, Factor Substitution and Economies of Scale in Manufacturing Industries in India," Papers e9214, Western Sydney - School of Business And Technology.
  7. Berndt, Ernst R. & Fuss, Melvyn A., 1986. "Productivity measurement with adjustments for variations in capacity utilization and other forms of temporary equilibrium," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 7-29.
  8. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, vol. 55(1), pages 43-68, January.
  9. Charles R. Hulten & Sylaja Srinivasan, 1999. "Indian Manufacturing Industry: Elephant or Tiger? New Evidence on the Asian Miracle," NBER Working Papers 7441, National Bureau of Economic Research, Inc.
  10. Hulten, Charles R., 1986. "Productivity change, capacity utilization, and the sources of efficiency growth," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 31-50.
  11. Slade, Margaret E., 1986. "Total-factor-productivity measurement when equilibrium is temporary : A Monte Carlo assessment," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 75-95.
  12. Nelson, Randy A, 1989. "On the Measurement of Capacity Utilization," Journal of Industrial Economics, Wiley Blackwell, vol. 37(3), pages 273-86, March.
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