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

  • Joe Mattey
  • Steven Strongin
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    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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    File URL: http://www.frbsf.org/econrsrch/econrev/97-2/3-17.pdf
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    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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    1. 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.
    2. Burnside, C & Eichenbaum, M & Rebelo, S, 1995. "Capital Utilization and Returns to Scale," RCER Working Papers 402, University of Rochester - Center for Economic Research (RCER).
    3. 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.
    4. Shea, John, 1993. "Do Supply Curves Slope Up?," The Quarterly Journal of Economics, MIT Press, vol. 108(1), pages 1-32, February.
    5. Carol Corrado & Joe Mattey, 1997. "Capacity Utilization," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 151-167, Winter.
    6. 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.).
    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. 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.).
    9. 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.
    10. Lawrence R. Klein, 1958. "The Measurement of Capacity," Cowles Foundation Discussion Papers 49, Cowles Foundation for Research in Economics, Yale University.
    11. Susanto Basu, 1995. "Procyclical Productivity: Increasing Returns or Cyclical Utilization?," NBER Working Papers 5336, National Bureau of Economic Research, Inc.
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