Technology, capital spending, and capacity utilization
Abstract: This paper examines the relationships between technology, capital spending, and capacity utilization. Recent technological changes have increased the flexibility of relationships between inputs and outputs in manufacturing, which may have eroded the predictive value of the utilization rate. This paper considers how technology might be expected to affect utilization. We show that recent changes could either lower average utilization by making it cheaper to hold excess capacity, or raise utilization by making further changes in capacity less costly and time-consuming. We then examine the effects of technology on utilization, using data on 111 manufacturing industries from 1974 to 2000. The results suggest that, for the average industry, the technological change of that period had a modest but appreciable effect, shaving between 0.2 percentage point and 2.3 percentage points off the utilization rate.
Keywords: Industrial capacity; Technology;
File(s): File format is text/html http://www.federalreserve.gov/pubs/feds/2004/200430/200430abs.html
File(s): File format is application/pdf http://www.federalreserve.gov/pubs/feds/2004/200430/200430pap.pdf
Provider: Board of Governors of the Federal Reserve System (U.S.)
Part of Series: Finance and Economics Discussion Series
Publication Date: 2004