Towards a Theory of Capacity Utilization: Shiftwork and the Workweek of Capital

22 Pages Posted: 2 Dec 2012

Date Written: 2002

Abstract

Capacity utilization, that is, the intensity with which the economy's capital stock is used, is an important source of output variations over business cycles. A straightforward measure of capacity utilization is the workweek of capital, or how long capital is operated on average. The workweek of capital differs from the workweek of labor because of variations in the extent to which shiftwork is used in the economy. The standard neoclassical growth model, when extended to include a variable workweek of capital, suggests that recent attempts to improve measures of productivity change in the presence of unobserved input variations fail to provide precise measures of the volatility of productivity change.

Suggested Citation

Hornstein, Andreas, Towards a Theory of Capacity Utilization: Shiftwork and the Workweek of Capital (2002). FRB Richmond Economic Quarterly, vol. 88, no. 2, Spring 2002, pp. 65-86. Available at SSRN: https://ssrn.com/abstract=2183331

Andreas Hornstein (Contact Author)

Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States
804-697-8266 (Phone)
804-697-8255 (Fax)

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