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


  • Joe Mattey
  • Steven Strongin


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.

Suggested Citation

  • Joe Mattey & Steven Strongin, 1997. "Factor utilization and margins for adjusting output: evidence from manufacturing plants," Economic Review, Federal Reserve Bank of San Francisco, pages 3-17.
  • Handle: RePEc:fip:fedfer:y:1997:p:3-17:n:2

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    References listed on IDEAS

    1. John Shea, 1993. "Do Supply Curves Slope Up?," The Quarterly Journal of Economics, Oxford University Press, vol. 108(1), pages 1-32.
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    3. 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.
    4. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1995. "Capital Utilization and Returns to Scale," NBER Chapters,in: NBER Macroeconomics Annual 1995, Volume 10, pages 67-124 National Bureau of Economic Research, Inc.
    5. Timothy F. Bresnahan & Valerie A. Ramey, 1994. "Output Fluctuations at the Plant Level," The Quarterly Journal of Economics, Oxford University Press, vol. 109(3), pages 593-624.
    6. Carol Corrado & Joe Mattey, 1997. "Capacity Utilization," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 151-167, Winter.
    7. Joe P. Mattey & Steven 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.).
    8. 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 139-153, April.
    9. Joe Mattey & Thijs ten Raa, 2009. "Primary Versus Secondary Production Techniques in U.S. Manufacturing," World Scientific Book Chapters,in: Input–Output Economics: Theory And Applications Featuring Asian Economies, chapter 16, pages 285-305 World Scientific Publishing Co. Pte. Ltd..
    10. Lawrence R. Klein, 1958. "The Measurement of Capacity," Cowles Foundation Discussion Papers 49, Cowles Foundation for Research in Economics, Yale University.
    11. 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.).
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    Cited by:

    1. ARATA Yoshiyuki, 2015. "Endogenous Business Cycles Caused by Nonconvex Costs and Interactions," Discussion papers 15085, Research Institute of Economy, Trade and Industry (RIETI).
    2. Cette Gilbert & Lecat Rémy & Ahmed Jiddou Ahmed Ould, 2016. "How do firms adjust production factors to the cycle?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(2), pages 361-394, June.
    3. Humphreys, Brad R., 2001. "The behavior of manufacturers inventories: Evidence from US industry level data," International Journal of Production Economics, Elsevier, vol. 71(1-3), pages 9-20, May.
    4. Andreas Hornstein, 2002. "Towards a theory of capacity utilization: shiftwork and the workweek of capital," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 65-86.
    5. Villa Stefania, 2012. "Capital Utilization and the Amplification Mechanism," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-22, September.
    6. Daniel Ryan, 2000. "Fluctuations in productivity growth rates and input utilization in U.S. manufacturing," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 28(2), pages 150-163, June.
    7. Engelhardt Lucas M., 2014. "Inventories, business cycles, and variable capital utilization," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 18(3), pages 1-18, May.
    8. Sustek, Roman, 2009. "Nonconvex Margins of Output Adjustment and Aggregate Fluctuations," MPRA Paper 17486, University Library of Munich, Germany.
    9. repec:spr:jeicoo:v:12:y:2017:i:2:d:10.1007_s11403-015-0169-1 is not listed on IDEAS
    10. Šustek, Roman, 2011. "Plant-level nonconvex output adjustment and aggregate fluctuations," Journal of Monetary Economics, Elsevier, vol. 58(4), pages 400-414.


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