Technology, Capital Spending, and Capacity Utilization

Cynthia Bansak, Norman Morin and Martha Starr ()
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Cynthia Bansak: Department of Economics, Center for Public Economics , San Diego State University
Norman Morin: Federal Reserve Board

Working Papers from San Diego State University, Department of Economics

Abstract: Capacity utilization has been a valuable indicator of inflationary pressure. Yet recent technological changes have made relationships between inputs and outputs more flexible, possibly eroding the predictive value of the utilization rate. This paper shows that, conceptually, technological change could either lower average utilization by making it cheaper to hold excess capacity, or raise utilization by making further changes in capacity less costly. Using data on 111 manufacturing industries from 1974 to 2000, we find that, for the average industry, technological change has had a modest but appreciable effect, shaving 0.2 to 2.3 percentage points off the utilization rate.

JEL-codes: D24 E22 E31 (search for similar items in EconPapers)
Date: 2003-03

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Related works:
Working Paper: Technology, capital spending, and capacity utilization (2004)
Journal Article: TECHNOLOGY, CAPITAL SPENDING, AND CAPACITY UTILIZATION (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:sds:wpaper:0010

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