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Capacity Utilization in Indian Paper Industry

Author

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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.

Suggested Citation

  • Kaustuva Barik, 2005. "Capacity Utilization in Indian Paper Industry," Microeconomics 0503001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpmi:0503001
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    References listed on IDEAS

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    More about this item

    Keywords

    economic capacity utilization; equilibrium capital stock; Indian paper industry; temporary equilibrium; translog variable cost function;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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