Nonparametric Measures of Capacity Utilization: A Dual Approach

Subhash Ray

No 2002-35, Working papers from University of Connecticut, Department of Economics

Abstract: This paper develops a nonparametric method of obtaining the minimum of the long run average cost curve of a firm to define its capacity output. This provides a benchmark for measuring of capacity utilization at the observed output level of the firm. In the case of long run constant returns to scale, the minimum of the short run average cost curve is determined to measure short run capacity utilization. An empirical application measures yearly rates of capacity utilization in U.S. manufacturing over the period 1968-1998. Nonparametric determination of the short run average cost curve under variable returns to scale using an iterative search procedure is described in an appendix to this paper.

Pages: 18 pages
Date: 2002-10
New Economics Papers: this item is included in nep-ecm and nep-ind
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Citations: View citations in EconPapers (2)

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