Measuring the Capacity Utilization of China's Regional Construction Industry Considering Undesirable Output

Abstract

China’s construction industry is facing the challenges of capacity optimization, energy conservation and emission reduction. Defining the capacity utilization status of China’s construction industry by carrying out the research on measuring the capacity utilization (CU), will be beneficial for coping with the challenges.

From the perspective of undesirable output, we firstly establish an evaluation index system for capacity utilization of construction industry in the presence of CO2 emissions. Then no/adding variable-link difference methods are applied to measure the CU value of China’s construction industry during 2011-2016, separately. Base on the measurement results, a comprehensive analysis of the reasons for the underutilization of capacity utilization has been conducted. At last, we also compare the advantages and disadvantages of the two measurement methods.

The study found that the average CU value of China’s construction industry during 2011-2016 was 0.3858, showing the existence of underutilization of capacity utilization, which is mainly caused by unreasonable variable input configuration. Meanwhile, the difference in capacity utilization between regions is significant. The average CU value measured by adding variable-link difference method is 0.3858, which is thought more accurate than the 0.5175 measured by no variable-link difference method.

This paper has practical guiding significance for establishing a nationwide construction capacity utilization monitoring system, while providing a reference frame and analytical method for the evaluation of capacity utilization of construction industry for other developing countries. The originality of this paper is that we focus on the capacity utilization of construction industry considering undesirable outputs.

Keywords: construction industry; capacity utilization; difference method; undesirable output