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Measuring the Average Period of Production

Author

Listed:
  • Pol Antràs
  • Vitalii Tubdenov

Abstract

Building on Böhm-Bawerk (1889), we propose a measure of the average period of production defined as a weighted average temporal distance between the time at which a firm employs its inputs and the time at which these inputs deliver finished goods to consumers. Under stationarity conditions, this measure corresponds to the ratio of a firm's total inventories to the cost of the goods it sells in a given period. Using data from publicly traded companies, we compute this measure for various industries and countries and show that, consistent with theory, it is lower the higher is the cost of capital.

Suggested Citation

  • Pol Antràs & Vitalii Tubdenov, 2025. "Measuring the Average Period of Production," AEA Papers and Proceedings, American Economic Association, vol. 115, pages 624-630, May.
    • Handle: RePEc:aea:apandp:v:115:y:2025:p:624-30
    DOI: 10.1257/pandp.20251090
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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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