Abstract
Empirically implementable measures of optimal capacity utilization are developed from the dynamic profit maximization perspective. The primal measure is based on behavior of the firm's supply along an optimal path to the steady state. The dual measure is based on the behavior of the dynamic value function in the stock of the quasi-fixed input. Rates of optimal capacity utilization are estimated for the U.S. food processing and distribution sector over the period 1948–1991.
Similar content being viewed by others
References
Adams M, Eguchi H, Mayer-zu-Scholochern F (1969) An economic analysis of the international trade. Paris, Organization for Economic Cooperation and Development
Berndt E, Fuss M (April 1989) Economic capacity utilization and productivity measurement for multiproduct firms with multiple quasi-fixed inputs. National Bureau of Economic Research Working Paper 2932
Berndt E, Hesse D (1985) Measuring and assessing capacity utilization in the manufacturing sectors of nine OECD countries. European Economic Review 30:961–989
Berndt E, Morrison C (1981) Capacity utilization: Underlying economic theory and an alternative approach. American Economic Review 71:48–52
Blackorby C, Schworm W (1982) Aggregate investment and consistent intertemporal technologies. Review of Economic Studies XLIX:595–614
Boyce W, DiPrima C (1992) Elementary differential equations and boundary value problems. John Wiley & Sons
Brechling, F (1975) Investment and employment decisions. University of Manchester Press
Caputo M (1990a) A qualitative characterization of the competitive nonrenewable resource extracting firm. Journal of Environmental Economics and Management 18:206–226
Caputo M (1990b) How to do comparative dynamics on the back of an envelope in optimal control theory. Journal of Economic Dynamics and Control 14:655–683
Chambers R, Lopez R (1984) A general dynamic supply response model. Northeast Journal of Agricultural and Resource Economics 13:142–154
Chenery H (1952) Overcapacity and accelerator principle. Econometrica 20:1–27
Conrad C, Unger R (1989) Productivity gaps and capacity utilization in the manufacturing sectors of five OECD countries, 1963–1982. Journal of Productivity Analysis 1:101–122
Conrad K, Veall MR (1991) A test for strategic excess capacity. Empirical Economics 16:433–445
Epstein L (1981) Duality theory and functional forms for dynamic factor demands. Review of Economic Studies 48:81–95
Epstein L (1978) The lechatelier principle in optimal control problems. Journal of Economic Theory 19:103–122
Epstein L, Denny M (1983) The multivariate flexible accelerator model: Its empirical restrictions and an application to U.S. manufacturing. Econometrica 51:647–670
Hauver J, Yee J, Ball VE (1991) Capacity utilization and measurement of agricultural productivity. Washington, DC, United States Department of Agriculture, Economic Research Service, Technical Bulletin 1978
Howard W, Shumway CR (1988) Dynamic adjustment in the U.S. dairy industry. American Journal of Agricultural Economics 70:837–747
Hulten C (1986) Productivity change, capacity utilization and sources of efficiency growth. Journal of Econometrics 33:31–50
Hulten C, Wyckoff F (1981) The measurement of economic depreciation. In: Depreciation, Inflation, and the Taxation of Income from Capital. Urban Institute Press, Washington, DC
Jorgenson D, Yun V (1991) Tax reform and the cost of capital. Clarendon Press, Oxford
Kamien MI, Schwartz NL (1991) Dynamic optimization: The calculus of variations and optimal control in economics and management. Elsevier, New York
Lopez R (1985) Supply response and investment in the Canadian food processing industry. American Journal of Agricultural Economics 67:40–48
Luh Y-H, Stefanou SE (1991) Productivity growth in U.S. agriculture under dynamic adjustment. American Journal of Agricultural Economics 73:1116–1125
Luh Y-H, Stefanou SE (forthcoming) Estimating dynamic dual models under nonstatic expectations. American Journal of Agricultural Economics
Meese R (1980) Dynamic factor demand schedules for labour and capital under rational expectations. Journal of Econometrics 14:141–158
Morrison C (1985a) Primal and dual capacity utilization: An application to productivity measurement in the U.S. automobile industry. Journal of Business and Economic Statistics 3:312–324
Morrison C (1985b) On the economic interpretation and the measurement of optimal capacity utilization with anticipatory expectations. Review of Economic Studies 52:295–310
Morrison C (1986) Productivity measurement with nonstatic expectations and varying capacity utilization. Journal of Econometrics 33:51–74
Nagatani K (1982) Macroeconomic dynamics. Cambridge University Press
Oniki H (1973) Comparative dynamics in the optimal control theory. Review of Economic Studies 29:276–279
Raddock R (1990) Recent developments in industrial capacity utilization. Federal Reserve Bulletin 411–435
Samuelson PA (1953) Prices of factors and goods in general equilibrium. Review of Economic Studies 21:1–20
Seierstad A, Sydsaeter (1977) Sufficient conditions in optimal control theory. International Economic Review 18:367–391
Tatom J (1982) Potential output and recent productivity decline. Federal Reserve Bank of St. Louis Review 64:3–16
Vasavada U, Chambers RG (1986) Investment in the U.S. agriculture. American Journal of Agricultural Economics 68:950–960
Wales T (1977) On the flexibility of flexible functional forms: An empirical approach. Journal of Econometrics 5:183–197
Wales T (1993) Fixed reproducible tangible wealth in the U.S. 1925–1989. United States Department of Commerce, Economics and Statistics Administration, Bureau of Economic Analysis, Washington, DC
Wales T (1991) Food marketing review. United States Department of Agriculture, Economic Research Service, Washington, DC
Wales T (1991) Food cost review. United States Department of Agriculture, Economic Research Service, Economic Report no. 662, Washington, DC
Wales T (1975) Marketing and transportation situation. United States Department of Agriculture, Economic Research Service, MTS 1-198, Washington, DC
Author information
Authors and Affiliations
Additional information
The helpful comments of Elvira Silva are gratefully acknowledged.