Patterns of Plant Adjustment
Abstract
This paper provides a description of the dynamic choices of manufacturing plants when they undertake rapid adjustment in output. The focus is on episodes that involve lumpy adjustment in capital or employment. I examine the behavior of variables such as capital utilization, hours per worker, overtime use, capacity utilization, materials and energy use. Finally I describe the observed patterns of productivity during those adjustment episodes and propose some hypotheses that seem to fit them. The costs associated with output adjustment seem to arise from building and destroying a particular organization of the structure of production and associated worker experience. As such they are related to learning-by-doing and investment in specific training.
( t a a p C C S (cid:3) P a t t e r n s o f P l a n t A d j u s t m e n t P l u t a r c h o s S a k e l l a r i s U n i v e r s i t y o f M a r y l a n d a n d B o a r d o f G o v e r n o r s o f t h e F e d e r a l R e s e r v e S y s t e m A u g u s t 2 0 0 0 A b s t r a c t T h i s p a p e r p r o v i d e s a d e s c r i p t i o n o f t h e d y n a m i c c h o i c e s o f m a n u f a c t u r i n g p l a n t s w h e n t h e y u n d e r t a k e r a p i d a d j u s t m e n t i n o u t p u t . T h e f o c u s i s o n e p i s o d e s t h a t i n v o l v e l u m p y a d j u s t m e n t i n c a p i t a l o r e m p l o y m e n t . I e x a m i n e t h e b e h a v i o r o f v a r i a b l e s s u c h a s c a p i t a l u t i l i z a t i o n , h o u r s p e r w o r k e r , o v e r t i m e u s e , c a p a c i t y u t i l i z a t i o n , m a t e r i a l s a n d e n e r g y u s e . F i n a l l y I d e s c r i b e t h e o b s e r v e d p a t t e r n s o f p r o d u c t i v i t y d u r i n g t h o s e a d j u s t m e n t e p i s o d e s a n d p r o p o s e s o m e h y p o t h e s e s t h a t s e e m t o (cid:12) t t h e m . T h e c o s t s a s s o c i a t e d w i t h o u t p u t a d j u s t m e n t s e e m t o a r i s e f r o m b u i l d i n g a n d d e s t r o y i n g a p a r t i c u l a r o r g a n i z a t i o n o f t h e s t r u c t u r e o f p r o d u c t i o n a n d a s s o c i a t e d w o r k e r e x p e r i e n c e . A s s u c h t h e y a r e r e l a t e d t o l e a r n i n g - b y - d o i n g a n d i n v e s t m e n t i n s p e c i (cid:12) c t r a i n i n g . K e y w o r d s : c a p i t a l i n v e s t m e n t , e m p l o y m e n t a d j u s t m e n t , c a p a c i t y u t i l i z a t i o n , p r o d u c t i v i t y , l e a r n i n g e (cid:11) e c t s , s p e c i (cid:12) c t r a i n i n g . J E L c o d e s : E 2 2 , D 2 4 , L 6 0 . (cid:3) D e p a r t m e n t o f E c o n o m ic s , U n iv e r s it y o f M a r y la n d , C o lle g e P a r k , M D 2 0 7 4 2 p l u t a r c h @ e l e c t r a . u m d . e d u ) . I w o u ld lik e t o t h a n k S u s a n P o la t z fo r o u t s t a n d in g r e s e a r c h a s s is a n c e , J o h n H a lt iw a n g e r fo r p r o v id in g o n e o f t h e d a t a s e t s u s e d h e r e , L u c ia F o s t e r fo r m a n y d is c u s s io n s b o u t t h e d a t a , A n a A iz c o r b e , R o g e r B e t a n c o u r t a n d s e m in a r p a r t ic ip a n t s a t C E S , F e d e r a l R e s e r v e B o a r d , n d t h e U n iv e r s it y o f M a r y la n d fo r u s e fu l c o m m e n t s . T h e d a t a u s e d in t h is p a p e r w e r e c o lle c t e d u n d e r t h e r o v is io n s o f T it le 1 3 U .S . C o d e a n d a r e o n ly a v a ila b le a t t h e C e n t e r fo r E c o n o m ic S t u d ie s ( C E S ) , U .S . e n s u s B u r e a u . T h e r e s e a r c h in t h is p a p e r w a s c o n d u c t e d b y t h e a u t h o r a s a r e s e a r c h a s s o c ia t e a t t h e E S . T h e v ie w s e x p r e s s e d h e r e d o n o t r e p r e s e n t t h o s e o f t h e B o a r d o f G o v e r n o r s o f t h e F e d e r a l R e s e r v e y s t e m , it s s t a (cid:11) , o r t h e U .S . C e n s u s B u r e a u . 1
1 T o 1 t t a S C r l t p t o a w t 2 T m s m i o c I n t r o d u c t i o n h i s p a p e r d e s c r i b e s t h e d y n a m i c p a t t e r n s i n p l a n t - l e v e l v a r i a b l e s d u r i n g e p i s o d e s o f r a p i d u t p u t a d j u s t m e n t . I a n a l y z e t w o l a r g e p a n e l s o f d a t a o n p l a n t s i n U . S . m a n u f a c t u r i n g f r o m 9 7 4 t o 1 9 9 1 . I i d e n t i f y d i s t i n c t e v e n t s o f l a r g e o u t p u t a d j u s t m e n t b y p l a n t s a n d t h e n s t u d y h e d y n a m i c c h o i c e o f d i (cid:11) e r e n t v a r i a b l e s a r o u n d s u c h e v e n t s . A n i n n o v a t i o n i n t h i s p a p e r i s h a t i t b r i n g s t o g e t h e r d a t a o n p l a n t p r o d u c t i o n a n d o p e r a t i o n s f r o m d i (cid:11) e r e n t s u r v e y s . I n d d i t i o n t o o u t p u t , e m p l o y m e n t , i n v e s t m e n t a n d o t h e r v a r i a b l e s f a m i l i a r f r o m t h e A n n u a l u r v e y o f M a n u f a c t u r e s ( A S M ) , I a n a l y z e l e s s f a m i l i a r v a r i a b l e s f r o m t h e S u r v e y o f P l a n t a p a c i t y ( S P C ) s u c h a s c a p i t a l w o r k q u a r t e r , c a p a c i t y u t i l i z a t i o n a n d t h e u s e o f o v e r t i m e . T h e e m p i r i c a l a p p r o a c h t h a t I e m p l o y i n t h i s p a p e r i s d e s c r i p t i v e a n d n o n - p a r a m e t r i c a t h e r t h a n s t r u c t u r a l . T h i s s e e m s t o b e a r e a s o n a b l e a p p r o a c h w h e n a t t e m p t i n g a (cid:12) r s t o o k a t t h e d a t a . T h e o b j e c t i v e h e r e i s t w o f o l d . F i r s t , I p r o v i d e s o m e b a s i c f a c t s a b o u t h e d y n a m i c s o f l u m p y a d j u s t m e n t w h e n a l t e r n a t i v e m a r g i n s o f a d j u s t m e n t a r e u s e d b y a l a n t s i m u l t a n e o u s l y . S e c o n d , I p r o v i d e a d e s c r i p t i o n o f p l a n t p r o d u c t i v i t y g r o w t h d u r i n g h o s e e p i s o d e s o f l u m p y a d j u s t m e n t . T h e u n c o v e r e d f a c t s s h e d s o m e l i g h t i n t o t h e n a t u r e f t h e c o s t s a s s o c i a t e d w i t h o u t p u t a d j u s t m e n t . T h e s e c o s t s s e e m t o a r i s e f r o m b u i l d i n g n d d e s t r o y i n g a p a r t i c u l a r o r g a n i z a t i o n o f t h e s t r u c t u r e o f p r o d u c t i o n a n d a s s o c i a t e d o r k e r e x p e r i e n c e . A s s u c h t h e y a r e r e l a t e d t o l e a r n i n g - b y - d o i n g a n d i n v e s t m e n t i n s p e c i (cid:12) c r a i n i n g . S o m e r e l a t e d p a p e r s o n p l a n t a d j u s t m e n t h e r e l a t e d l i t e r a t u r e o n f a c t o r d e m a n d i s q u i t e v o l u m i n o u s a n d c a n n o t p o s s i b l y b e s u m a r i z e d h e r e a d e q u a t e l y . H a m e r m e s h a n d P f a n n ( 1 9 9 6 ) p r o v i d e a v e r y g o o d a n d r e c e n t u r v e y . I p r o v i d e a b r i e f r e v i e w o f a f e w p a p e r s o n a d j u s t m e n t a t t h e p l a n t l e v e l o n w h i c h y s t u d y b u i l d s . S e v e r a l p a p e r s e x a m i n e d t h e a d j u s t m e n t o f o n e o f t h e t w o m a i n f a c t o r s o f p r o d u c t i o n n i s o l a t i o n , e i t h e r c a p i t a l o r l a b o r . O n e o f t h e m e s s a g e s o f t h e s e p a p e r s i s t h a t a d j u s t m e n t 1 f e m p l o y m e n t a n d c a p i t a l a t t h e p l a n t l e v e l i s q u i t e l u m p y . T h e s e p a p e r s d o n o t e x a m i n e 1 S e e H a m e r m e s h ( 1 9 8 9 ) o r C a b a lle r o e t a l. ( 1 9 9 7 ) fo r e m p lo y m e n t a n d D o m s a n d D u n n e ( 1 9 9 8 ) fo r a p it a l. 2
t a p i w p p k e a t s t t o a O a c (cid:12) r d l e 2 h e i n t e r r e l a t i o n b e t w e e n c a p i t a l a n d e m p l o y m e n t a d j u s t m e n t a t t h e p l a n t l e v e l . T h e y 3 l s o d o n o t c o n s i d e r t h e u s e o f o t h e r m a r g i n s o f a d j u s t m e n t a v a i l a b l e t o t h e p l a n t . B r e s n a h a n a n d R a m e y ( 1 9 9 4 ) w e r e i n s t r u m e n t a l i n l o o k i n g i n s i d e t h e \ b l a c k b o x " o f t h e l a n t p r o d u c t i o n f u n c t i o n . T h e y d e m o n s t r a t e d t h a t a v a r i e t y o f m a r g i n s i s u s e d b y p l a n t s n o r d e r t o a d j u s t p r o d u c t i o n . T h e i r f o c u s w a s o n a u t o m o b i l e p l a n t s a n d (cid:13) u c t u a t i o n s a t e e k l y f r e q u e n c i e s . T h e y d e m o n s t r a t e d t h a t n o n - c o n v e x m a r g i n s o f a d j u s t m e n t , s u c h a s l a n t s h u t d o w n s a n d c h a n g e s i n s h i f t w o r k , p l a y a l a r g e r o l e i n t h e s h o r t - r u n d y n a m i c s o f l a n t o u t p u t . I n m a n y r e s p e c t s , I b u i l d o n t h e w o r k o f B r e s n a h a n a n d R a m e y ( 1 9 9 4 ) . A e y d i (cid:11) e r e n c e i s t h a t t h e p r e s e n t p a p e r e x a m i n e s d a t a s e t s t h a t a r e r e p r e s e n t a t i v e o f t h e n t i r e U . S . m a n u f a c t u r i n g s e c t o r . A n a d d i t i o n a l d i (cid:11) e r e n c e i s t h a t t h e d a t a u s e d h e r e a r e n n u a l , f o r t h e m o s t p a r t . T h i s a l l o w s m e t o l o o k a t m e d i u m - r u n (cid:13) u c t u a t i o n s i n o u t p u t h a t m a y i n c l u d e a d j u s t m e n t i n c a p i t a l . O f c o u r s e , t i m e a g g r e g a t i o n o f m y d a t a m a y m a s k o m e i n t e r e s t i n g p h e n o m e n a t h a t a r e a p p a r e n t a t t h e w e e k l y f r e q u e n c y . M a t t e y a n d S t r o n g i n ( 1 9 9 5 ) d e m o n s t r a t e w h y i t i s i m p o r t a n t t o e x a m i n e a b r o a d s p e c r u m o f m a n u f a c t u r i n g . T h e y s h o w t h a t m a n u f a c t u r i n g p l a n t s d i (cid:11) e r q u i t e a b i t i n h o w h e y a c c o m p l i s h o u t p u t a d j u s t m e n t d e p e n d i n g o n s h u t d o w n c o s t a s p e c t s o f t h e i r t e c h n o l g y . T h e y c l a s s i f y i n d u s t r i e s i n t o t h r e e t e c h n o l o g y c l a s s e s : 1 ) V a r i a b l e W o r k q u a r t e r w i t h s s e m b l y - t y p e o p e r a t i o n s ; 2 ) C o n t i n u o u s P r o c e s s i n g w i t h l a r g e s h u t d o w n c o s t s ; a n d 3 ) t h e r , a c a t e g o r y i n b e t w e e n t h e (cid:12) r s t t w o . T h e y (cid:12) n d t h a t V a r i a b l e - W o r k q u a r t e r p l a n t s c c o m p l i s h a l a r g e p a r t o f o u t p u t a d j u s t m e n t s b y v a r y i n g t h e w o r k p e r i o d o f c a p i t a l w h e r e a s o n t i n u o u s p r o c e s s i n g p l a n t s d o n o t . T h i s p a p e r i s a l s o r e l a t e d t o S h a p i r o ( 1 9 8 6 ) . U s i n g a g g r e g a t e d a t a , h e e s t i m a t e d h o w r m s u s e b o t h c a p i t a l u t i l i z a t i o n a n d c a p i t a l e x p a n s i o n ( t h r o u g h i n v e s t m e n t ) i n o r d e r t o e s p o n d o p t i m a l l y t o s h o c k s . I n p a r t i c u l a r , h e s h o w e d t h a t t e m p o r a r y s h o c k s a r e a c c o m m o a t e d m o s t l y b y a d j u s t m e n t o f t h e w o r k p e r i o d o f c a p i t a l , w h i c h h e f o u n d t o b e r e l a t i v e l y e s s c o s t l y t o a d j u s t . 2 A s r e v ie w e d in H a m e r m e s h a n d P fa n n ( 1 9 9 6 ) , h o w e v e r , t h e r e a r e s t u d ie s t h a t d o s o fo r a g g r e g a t e d a t a . 3 C a b a lle r o e t a l. ( 1 9 9 7 ) , h o w e v e r , d o p o in t o u t t h a t h o u r s p e r w o r k e r a r e n e g a t iv e ly c o r r e la t e d w it h m p lo y m e n t c h a n g e s . 3
3 I ( m t C o 1 q t a t p L ( s 1 B t t n 1 n l 3 h t D a t a D e s c r i p t i o n n t h i s p a p e r I u s e m i c r o d a t a f r o m t h e U . S . C e n s u s B u r e a u ’ s A n n u a l S u r v e y o f M a n u f a c t u r e s A S M ) a n d S u r v e y o f P l a n t C a p a c i t y ( S P C ) . T h e A S M p r o v i d e s i n f o r m a t i o n a b o u t U . S . a n u f a c t u r i n g p l a n t s o n a n a n n u a l b a s i s , d r a w i n g u p o n d a t a f r o m a p a n e l o f r e s p o n d e n t s h a t i s s e l e c t e d e v e r y (cid:12) v e y e a r s . I n c e n s u s y e a r s , t h e A S M d a t a i s c o l l e c t e d a s p a r t o f t h e e n s u s o f M a n u f a c t u r e s . T h e S P C c o l l e c t s d a t a o n f o u r t h - q u a r t e r p r o d u c t i o n l e v e l s a n d t h e r i n f o r m a t i o n a b o u t o p e r a t i o n s o n a s u b - s a m p l e o f p l a n t s i n t h e A S M . F r o m 1 9 7 4 t o 4 9 8 8 , t h e r e w e r e t h r e e p a n e l s i n t h e y e a r s 1 9 7 4 - 7 8 , 1 9 7 9 - 8 3 , a n d 1 9 8 4 - 8 8 . A b o u t t h r e e u a r t e r s o f p l a n t s i n t h e S P C r e m a i n i n t h e s a m p l e f o r a n e n t i r e p a n e l . O n a v e r a g e , e i g h t o n i n e t h o u s a n d p l a n t s p e r y e a r w e r e s u r v e y e d f o r t h e S P C a b o u t t h e i r a c t u a l o p e r a t i o n s s w e l l a s t h e i r \ p r e f e r r e d " o p e r a t i o n s a t c a p a c i t y ( s e e t h e A p p e n d i x f o r t h e d e (cid:12) n i t i o n o f h i s n o t i o n o f c a p a c i t y ) . F o r e a c h o f t h e t h r e e p a n e l s , t h e r e w e r e s i x t o s e v e n t h o u s a n d l a n t s t h a t p r o v i d e d d a t a f o r t h e e n t i r e p e r i o d . I u s e t w o d a t a s a m p l e s i n t h i s p a p e r . T h e (cid:12) r s t s a m p l e , r e f e r r e d t o a s B A L A N C E D - R D , i s a p a n e l o f A S M r e s p o n d e n t s t h a t w e r e i n c o n t i n u o u s o p e r a t i o n f r o m 1 9 7 2 t o 1 9 9 3 s e e C o o p e r e t a l . , 1 9 9 9 f o r a m o r e d e t a i l e d d e s c r i p t i o n ) . D a t a r e q u i r e m e n t s l i m i t e d t h i s a m p l e t o t h e y e a r s 1 9 7 4 t h r o u g h 1 9 9 1 f o r a t o t a l n u m b e r o f 1 8 4 , 9 1 6 o b s e r v a t i o n s a n d 0 , 6 7 5 p l a n t s . T h e s e c o n d s a m p l e , r e f e r r e d t o a s M A T C H E D , i s t h e s u b s e t o f p l a n t s i n A L A N C E D - L R D t h a t w e r e a l s o r e s p o n d e n t s i n t h e S P C . T h e d a t a s e t w a s r e s t r i c t e d t o h e y e a r s 1 9 7 9 - 8 8 b e c a u s e o f t h e a v a i l a b i l i t y o f i m p o r t a n t u t i l i z a t i o n v a r i a b l e s o n l y d u r i n g 5 h e s e y e a r s . A d d i t i o n a l l y , o n l y p l a n t s t h a t h a d a t l e a s t (cid:12) v e y e a r s o f c o n t i n u o u s d a t a a n d o n - m i s s i n g v a r i a b l e s w e r e k e p t . T h e M A T C H E D s a m p l e c o n t a i n s 9 , 3 7 7 o b s e r v a t i o n s a n d , 3 6 2 p l a n t s . I u s e t h r o u g h o u t t h e p a p e r a c l a s s i (cid:12) c a t i o n o f p l a n t s a c c o r d i n g t o t h e p r o d u c t i o n t e c h o l o g y i n t h e i r i n d u s t r y . T h r e e g r o u p s a r e d e (cid:12) n e d : 1 ) C o n t i n u o u s P r o c e s s o r s w h o f a c e a r g e s h u t d o w n c o s t s , 2 ) V a r i a b l e W o r k q u a r t e r p l a n t s w i t h a s s e m b l y - t y p e o p e r a t i o n s , a n d ) O t h e r , a c a t e g o r y i n b e t w e e n t h e (cid:12) r s t t w o i n t e r m s o f c a p i t a l u t i l i z a t i o n p a t t e r n s . ( S e e 4 T h e s u r v e y c o n t in u e d a ft e r 1 9 8 8 b u t it s s a m p le d e s ig n a n d c o n t e n t c h a n g e d . T h e in fo r m a t io n g iv e n e r e is v a lid fo r y e a r s 1 9 7 4 - 8 8 . 5 N o t e t h a t a ll p la n t s in M A T C H E D a r e c o n t in u o u s r e p o r t e r s in t h e A S M b y c o n s t r u c t io n . T h is f a c ilia t e s t h e c a lc u la t io n o f r e lia b le c a p it a l s t o c k v a r ia b le s . 4
t s p T d 2 o a c t r v o s f M S i f 4 T o e t v s h e A p p e n d i x f o r d e (cid:12) n i t i o n s a n d M a t t e y a n d S t r o n g i n , 1 9 9 5 f o r e x t e n s i v e d i s c u s s i o n ) . I n t e r m s o f c o m p a r i s o n w i t h t h e w h o l e m a n u f a c t u r i n g s e c t o r , B A L A N C E D - L R D c o n i s t s m o s t l y o f l a r g e p l a n t s t h a t a c c o u n t f o r a b o u t 4 5 % o f o u t p u t i n m a n u f a c t u r i n g . T h e l a n t s i n M A T C H E D a r e e v e n l a r g e r i n s i z e d u e t o t h e s e l e c t i o n p r o c e s s f o l l o w e d h e r e . h e s a m p l e a c c o u n t s f o r a b o u t 1 5 % o f m a n u f a c t u r i n g o u t p u t o n a v e r a g e t h o u g h t h i s s h a r e 6 e c r e a s e s a b i t o v e r t i m e b e c a u s e o f a t t r i t i o n . C e r t a i n i n d u s t r i e s s u c h a s P e t r o l e u m ( S I C 9 ) , a n d T r a n s p o r t a t i o n E q u i p m e n t ( S I C 3 7 ) a r e o v e r - r e p r e s e n t e d i n M A T C H E D . M a n y t h e r s , s u c h a s F o o d ( S I C 2 0 ) , a r e u n d e r - r e p r e s e n t e d . T h e t i m e s e r i e s p l o t s o f v a r i o u s v a r i b l e s f o r t h e a v e r a g e p l a n t i n M A T C H E D a n d B A L A N C E D - L R D s e e m t o d i s p l a y f a m i l i a r y c l i c a l p a t t e r n s . A k e y a s s u m p t i o n u s e d t h r o u g h o u t t h e p a p e r i n t h e c o n s t r u c t i o n o f c a p i t a l i s t h a t i t a k e s 1 y e a r t o b u i l d c a p i t a l . A S M v a r i a b l e s a r e a n n u a l a v e r a g e s w h e r e a s S P C v a r i a b l e s e f e r t o t h e f o u r t h q u a r t e r o f t h e c a l e n d a r y e a r . F o r c o n s i s t e n c y , I c o n v e r t f o u r t h - q u a r t e r a v e r a g e (cid:0) 1 a r i a b l e s t o a n n u a l a v e r a g e s u s i n g t h e f o r m u l a : x = ( 5 = 8 ) x + ( 3 = 8 ) x . I n t h e c a s e t t t f s o m e S P C v a r i a b l e s I a l s o r e p o r t r e s u l t s o n f o u r t h - q u a r t e r v a l u e s s i n c e t h e y p r o v i d e o m e i n f o r m a t i o n a b o u t t h e t i m i n g o f a n y c h a n g e s . A l l r e s u l t s r e g a r d i n g s h i f t u s e r e f e r t o o u r t h - q u a r t e r n u m b e r s . I u s e t h e t w o d a t a s e t s i n p a r a l l e l f o r m y a n a l y s i s . T h e r e l a t i v e a d v a n t a g e o f t h e A T C H E D s a m p l e i s t h a t i t c o n t a i n s i m p o r t a n t v a r i a b l e s t h a t m a y b e f o u n d o n l y i n t h e P C . O n t h e o t h e r h a n d , t h e B A L A N C E D - L R D s a m p l e i s l a r g e r , i t c o v e r s m o r e y e a r s a n d t i s m o r e r e p r e s e n t a t i v e o f m a n u f a c t u r i n g i n i t s s i z e d i s t r i b u t i o n o f p l a n t s . T h u s , w h e n n o t o c u s i n g o n S P C v a r i a b l e s , I w i l l p l a c e m o r e e m p h a s i s o n r e s u l t s f r o m B A L A N C E D - L R D . M e t h o d o l o g y h e a i m o f t h i s p a p e r i s t o p r o v i d e s o m e b a s i c f a c t s a b o u t h o w p l a n t s u s e d i (cid:11) e r e n t m a r g i n s f a d j u s t i n g t h e i r o u t p u t u n d e r d i (cid:11) e r e n t c i r c u m s t a n c e s . T h e e m p i r i c a l a p p r o a c h t h a t I m p l o y i n t h i s p a p e r i s d e s c r i p t i v e a n d n o n - p a r a m e t r i c r a t h e r t h a n s t r u c t u r a l . T h i s s e e m s o b e a r e a s o n a b l e a p p r o a c h w h e n a t t e m p t i n g a (cid:12) r s t l o o k a t t h e d a t a . 6 T h is a t t r it io n o f p la n t s is o v e r w h e lm in g ly d u e t o t h e r e q u ir e m e n t t h a t t h e r e s h o u ld b e n o m is s in g a r ia b le o f in t e r e s t in a s e t o f c o n t ig u o u s y e a r s w it h le n g t h o f a t le a s t 5 y e a r s . A t t r it io n fr o m t h e S P C u r v e y is q u a n t it a t iv e ly m u c h le s s im p o r t a n t . 5
a t o o S m e h o r o t a p o c T h e s t r a t e g y I f o l l o w i s t o i d e n t i f y d i s t i n c t e v e n t s o f l a r g e o u t p u t a d j u s t m e n t b y p l a n t s n d t h e n s t u d y t h e d y n a m i c c h o i c e o f d i (cid:11) e r e n t v a r i a b l e s a r o u n d s u c h e v e n t s . I a s s u m e t h a t h e s e e v e n t s w e r e p r o m p t e d b y a l a r g e s h o c k t o t h e p l a n t ’ s p r o (cid:12) t a b i l i t y o r t h e a c c u m u l a t i o n f a s e r i e s o f s h o c k s t o w h i c h t h e p l a n t h a d n o t r e s p o n d e d p r e v i o u s l y . I d e (cid:12) n e t h r e e t y p e s o f r a p i d a n d l a r g e a d j u s t m e n t . O n e i n v o l v e s s u b s t a n t i a l e x p a n s i o n f t h e c a p i t a l s t o c k t h r o u g h i n v e s t m e n t . F o l l o w i n g m u c h o f t h e l i t e r a t u r e I c a l l t h i s a P I K E . T h e o t h e r t w o t y p e s i n v o l v e a s u b s t a n t i a l i n c r e a s e i n p r o d u c t i o n w o r k e r e m p l o y e n t ( P O S E G ) o r a s u b s t a n t i a l d e c r e a s e i n p r o d u c t i o n w o r k e r e m p l o y m e n t ( N E G E G ) . T h e x a c t d e (cid:12) n i t i o n s o f t h e s e a d j u s t m e n t e v e n t s a r e : S P I K E (cid:15) A p l a n t u n d e r g o e s a n e q u i p m e n t i n v e s t m e n t i n y e a r t i f i t s e q u i p m e n t i n v e s t m e n t - t o - c a p i t a l r a t i o ( I = K ) i s g r e a t e r t h a n 0 : 2 0 a n d i n t h e p r e c e d i n g y e a r t h a t r a t i o w a s l e s s t h a n 0 : 2 0 . P O S E G (cid:15) A p l a n t e x p e r i e n c e s a l a r g e i n c r e a s e i n e m p l o y m e n t ( ) i n y e a r t i f t h e g r o w t h r a t e o f p r o d u c t i o n w o r k e r e m p l o y m e n t i n t i s g r e a t e r t h a n 1 0 % a n d i n t h e p r e c e d i n g y e a r t h e g r o w t h r a t e i s l e s s t h a n 1 0 % i n a b s o lu t e v a lu e . N E G E G (cid:15) A p l a n t e x p e r i e n c e s a l a r g e d e c r e a s e i n e m p l o y m e n t ( ) i n y e a r t i f t h e g r o w t h r a t e o f p r o d u c t i o n w o r k e r e m p l o y m e n t i n t i s l e s s t h a n - 1 0 % a n d i n t h e p r e c e d i n g y e a r t h e g r o w t h r a t e i s l e s s t h a n 1 0 % i n a b s o lu t e v a lu e . A d d i t i o n a l l y , i n o r d e r f o r a n o b s e r v a t i o n y e a r t o q u a l i f y a s a n e v e n t t h e p l a n t h a s t o a v e a l l r e l e v a n t d a t a f o r a t i m e w i n d o w o f (cid:12) v e y e a r s a r o u n d t h e e v e n t . I d e n o t e t h e y e a r f t h e e v e n t b y t a n d t h e s u r r o u n d i n g y e a r s t (cid:0) 2 t h r o u g h t + 2 . S i n c e I d o n o t p r o v i d e a s t r u c t u r a l m o d e l o f p l a n t b e h a v i o r s u b j e c t t o s h o c k s I h a v e t o e s o r t t o a n a d h o c i d e n t i (cid:12) c a t i o n s c h e m e . I n p a r t i c u l a r , I a s s u m e t h a t t w o c o n s e c u t i v e y e a r s f l a r g e a d j u s t m e n t a r e p a r t o f t h e s a m e a d j u s t m e n t e p i s o d e . I n o t h e r w o r d s , I e x c l u d e h e p o s s i b i l i t y t h a t a s u b s t a n t i a l s h o c k h i t s t h e p l a n t i n t h e c a l e n d a r y e a r a f t e r a l u m p y 7 d j u s t m e n t w a s u n d e r t a k e n . 7 I n t h e c a s e o f in v e s t m e n t s p ik e s t h e r e is a n a d d it io n a l r e a s o n fo r d o in g s o . T h e r e is e v id e n c e t h a t s o m e la n t s a r e r e c o r d e d a s h a v in g m u lt i- y e a r s p ik e s ( S e e C o o p e r e t a l., 1 9 9 9 ) . A s in g le s p ik e e p is o d e is s p r e a d v e r t w o c o n s e c u t iv e c a le n d a r y e a r s in t h e A S M , d u e t o t im e a g g r e g a t io n in t h e d a t a a n d t im e t o b u ild a p it a l. 6
t T w a e v t t a o t d c s a m a t s b c t o t T h e r e s u l t s p r e s e n t e d b e l o w a r e c o n d i t i o n a l m e a n s o f t h e v a r i a b l e s o f i n t e r e s t d u r i n g h e (cid:12) v e y e a r s c e n t e r e d o n t h e e v e n t y e a r a f t e r c o n t r o l l i n g f o r p l a n t a n d y e a r (cid:12) x e d e (cid:11) e c t s . h e m o d e l i s + 2 +t j (cid:12) (cid:2) E V E N T D + (cid:12) (cid:2) O T H E R D + (cid:15) ; ( 1 ) X = (cid:22) + (cid:23) + j O is is is i s X is (cid:0) = 2 j h e r e X i s o n e o f t h e v a r i a b l e s o f i n t e r e s t f o r p l a n t i i n y e a r s , (cid:22) a n d (cid:23) a r e p l a n t is i s +t j n d y e a r (cid:12) x e d e (cid:11) e c t s . T h e d u m m y v a r i a b l e s E V E N T D e q u a l s 1 i f a n d o n l y i f p l a n t i is x p e r i e n c e d a n e v e n t o f t y p e D ( S P I K E , N E G E G , o r P O S E G ) i n y e a r s (cid:0) j . T h e d u m m y a r i a b l e O T H E R D e q u a l s 1 i f a n d o n l y i f p l a n t i h a s e x p e r i e n c e d a t l e a s t o n e e v e n t o f is y p e D a n d a n y e v e n t o f t y p e D h a p p e n e d b e f o r e y e a r s (cid:0) 2 o r a f t e r y e a r s + 2 . I t c a p t u r e s h e a v e r a g e l e v e l o f X i n y e a r s o u t s i d e t h e w i n d o w o f e v e n t D f o r p l a n t s t h a t e x p e r i e n c e d t l e a s t o n e e v e n t o f t y p e D : I n t h e c a s e o f a s t a t i o n a r y v a r i a b l e i t p r o v i d e s a n i n d i c a t i o n f t h e m e a n t h a t t h e v a r i a b l e r e v e r t s t o a f t e r t h e a d j u s t m e n t e p i s o d e . D i s c u s s i o n o f y e a r e (cid:11) e c t s T h e i n c l u s i o n o f (cid:12) x e d y e a r e (cid:11) e c t s i s o f d u a l i m p o r t a n c e . T h e y c o n t r o l f o r a g g r e g a t e r e n d s i n t h e v a r i a b l e s . M o r e i m p o r t a n t l y , t h e y c o n t r o l f o r o t h e r a g g r e g a t e d y n a m i c s i n t h e a t a t h a t m a y b e u n r e l a t e d t o t h e p a r t i c u l a r p l a n t - a d j u s t m e n t e p i s o d e b e i n g s t u d i e d . O f o u r s e , t o t h e e x t e n t t h a t s h o c k s a r e a g g r e g a t e a n d i n d i v i d u a l p l a n t r e s p o n s e t o a g g r e g a t e h o c k s i s h o m o g e n e o u s t h e r e m o v a l o f y e a r e (cid:11) e c t s w o u l d b i a s t h e e s t i m a t e s o f d y n a m i c d j u s t m e n t p a t t e r n s . T h i s c o n c e r n , h o w e v e r , i s n o t w a r r a n t e d i n m y d a t a a s t h e v a s t a j o r i t y o f t h e v a r i a n c e i n i n v e s t m e n t a n d e m p l o y m e n t i s d u e t o i d i o s y n c r a t i c r a t h e r t h a n g g r e g a t e c o m p o n e n t s . D i s c u s s i o n o f p la n t h e t e r o g e n e i t y T h e r e i s a l a r g e l i t e r a t u r e s t r e s s i n g t h e i m p o r t a n c e o f h e t e r o g e n e i t y a m o n g p l a n t s i n h e i r b e h a v i o r . T h e i n c l u s i o n o f a (cid:12) x e d p l a n t e (cid:11) e c t h e r e i s a n a t t e m p t t o c o n t r o l f o r u c h h e t e r o g e n e i t y e v e n t h o u g h , b y d e (cid:12) n i t i o n , i t c a n n o t c o n t r o l f o r d i (cid:11) e r e n t i a l d y n a m i c e h a v i o r . A w a y t o g e t a r o u n d t h a t p r o b l e m i s t o s p l i t p l a n t s a c c o r d i n g t o o b s e r v a b l e h a r a c t e r i s t i c s . I h a v e r e p e a t e d t h e a n a l y s i s a f t e r s p l i t t i n g t h e p l a n t s a c c o r d i n g t o w h e t h e r h e i r t e c h n o l o g y o f p r o d u c t i o n i s o n e o f c o n t i n u o u s p r o c e s s i n g , v a r i a b l e w o r k q u a r t e r , o r t h e r . A n o t h e r u s e f u l s p l i t w o u l d b e b y p l a n t s i z e t h o u g h t h i s w o u l d o n l y b e a p p l i c a b l e f o r h e B A L A N C E D - L R D s a m p l e a s t h e p l a n t s i n t h e M A T C H E D s a m p l e a r e u n i f o r m l y v e r y 7
l t e w b A a c a u 5 T l d l t T t p 5 F e u p u r a r g e . D i s c u s s i o n o f d e (cid:12) n i t i o n s T h e r e i s s u b s t a n t i a l e v i d e n c e t h a t t h e e m p l o y m e n t o f n o n - p r o d u c t i o n w o r k e r s i s s m o o t h e r h a n t h a t o f p r o d u c t i o n w o r k e r s . F o r t h i s r e a s o n s h a r p m o v e m e n t s i n p r o d u c t i o n w o r k e r m p l o y m e n t m i r r o r s h a r p m o v e m e n t s i n t o t a l e m p l o y m e n t . S i n c e t h i s i s t r u e i n m y d a t a a s e l l , I d e (cid:12) n e P O S E G a n d N E G E G i n t e r m s o f p r o d u c t i o n w o r k e r s . T h e r e s u l t s I p r e s e n t e l o w a r e n o t s e n s i t i v e t o t h e c u t o (cid:11) g r o w t h r a t e i n t h e d e (cid:12) n i t i o n s b e i n g i n c r e a s e d t o 0 . 1 5 . d d i t i o n a l l y , t h e r e s u l t s a r e n o t s e n s i t i v e t o t h e g r o w t h r a t e o f e m p l o y m e n t b e i n g d e (cid:12) n e d s a 4 t h - q u a r t e r t o 4 t h - q u a r t e r c h a n g e i n s t e a d o f a c h a n g e i n t h e a n n u a l a v e r a g e s . T h e u t o (cid:11) v a l u e f o r I = K o f 0 . 2 0 i n t h e d e (cid:12) n i t i o n o f a S P I K E h a s b e e n u s e d b y P o w e r ( 1 9 9 8 ) n d C o o p e r e t a l . ( 1 9 9 9 ) . T h e s e p a p e r s s u p p o r t t h e c h o i c e o f t h e d e (cid:12) n i t i o n f o r a s p i k e s e d h e r e a n d p r o v i d e e v i d e n c e o f r o b u s t n e s s t o c u t o (cid:11) l e v e l s o t h e r t h a n 0 . 2 0 . R e s u l t s h e s e t s o f g r a p h s t h a t f o l l o w d i s p l a y t h e d y n a m i c b e h a v i o r o f p l a n t v a r i a b l e s a r o u n d + u m p y a d j u s t m e n t e p i s o d e s . I g r a p h t h e e s t i m a t e d v a l u e s o f (cid:12) ( j = - 2 t o 2 ) a n d (cid:12) a s t j O i (cid:11) e r e n c e s f r o m (cid:12) . T h i s r e - i n f o r c e s t h e f a c t t h a t d u e t o t h e i n c l u s i o n o f (cid:12) x e d e (cid:11) e c t s a b s o - t u t e m a g n i t u d e s a r e n o t m e a n i n g f u l p e r s e w h e r e a s r e l a t i v e m a g n i t u d e s a r e . I a l s o p r o v i d e h e s t a n d a r d e r r o r o f t h e (cid:12) c o e Æ c i e n t a s a n i n d i c a t i o n o f t h e p r e c i s i o n o f t h e e s t i m a t e s . t + h e s t a n d a r d e r r o r s o f t h e o t h e r f o u r e s t i m a t e d c o e Æ c i e n t s , (cid:12) , d i d n o t d i (cid:11) e r b y m o r e t j h a n 1 5 % . F o r e a s e o f i n t e r p r e t a t i o n , I d i s p l a y a s m u c h o f t h e q u a n t i t a t i v e i n f o r m a t i o n a s o s s i b l e i n g r a p h i c a l f o r m . . 1 I n v e s t m e n t S p i k e s i g u r e s 1 a n d 2 d i s p l a y t h e d y n a m i c b e h a v i o r o f p l a n t v a r i a b l e s a r o u n d i n v e s t m e n t S P I K E p i s o d e s . I t s e e m s t h a t f o r t h e M A T C H E D s a m p l e c o n t i n u o u s p r o c e s s i n g p l a n t s a r e n d e r - r e p r e s e n t e d i n t h e p o p u l a t i o n t h a t e x p e r i e n c e d s p i k e s , w h i l e v a r i a b l e w o r k q u a r t e r l a n t s a r e o v e r - r e p r e s e n t e d . A r e l a t e d f a c t i s t h a t p l a n t s t h a t o p e r a t e t h r e e s h i f t s a r e n d e r - r e p r e s e n t e d i n t h e e v e n t p o p u l a t i o n w h i l e p l a n t s t h a t o p e r a t e t w o s h i f t s a r e o v e r e p r e s e n t e d . T h e s e d o n o t h o l d , h o w e v e r , f o r B A L A N C E D - L R D . 8
F i g u r e 1 a c o n t a i n s t h e f r e q u e n c y d i s t r i b u t i o n o f a v a r i a b l e c o n s t r u c t e d t o c a p t u r e t h e s t a t e o f d e m a n d f a c i n g t h e p l a n t d u r i n g t h e S P I K E e p i s o d e a n d c o n t r a s t i t t o t h e d i s t r i b u t i o n o f t h e s t a t e o f d e m a n d i n t h e p o p u l a t i o n . I t c o m p a r e s t h e n u m b e r o f s h i f t s t h a t a p l a n t i s e m p l o y i n g t o t h e n u m b e r o f s h i f t s i t w o u l d e m p l o y a t c a p a c i t y . W h e n a c t u a l s h i f t s a r e f e w e r t h a n s h i f t s a t c a p a c i t y t h e p l a n t m u s t b e e x p e r i e n c i n g a l o w s t a t e o f d e m a n d . T h i s c o r r e s p o n d s t o s t a t e s 2 a n d 5 ( s e e t h e A p p e n d i x f o r t h e e x a c t d e (cid:12) n i t i o n ) . C o n v e r s e l y , w h e n a c t u a l s h i f t s a r e m o r e t h a n s h i f t s a t c a p a c i t y t h e p l a n t m u s t b e e x p e r i e n c i n g a h i g h s t a t e o f d e m a n d ( s t a t e s 3 a n d 6 ) . T h e c h o i c e o f s h i f t w o r k i n s t a t e s 1 , 4 , a n d 7 s i g n a l s 8 a \ n o r m a l " s t a t e o f d e m a n d . I n t h e c a s e o f i n v e s t m e n t s p i k e s , s h i f t b e h a v i o r d o e s n o t c h a n g e v e r y m u c h ( s e e e v i d e n c e b e l o w ) s o t h i s m e a s u r e i s n o t v e r y i n f o r m a t i v e . S t i l l , t h e r e i s m i l d e v i d e n c e t h a t b e f o r e t h e S P I K E m o r e p l a n t s f a c e h i g h d e m a n d t h a n a f t e r w a r d s . T h e i n v e s t m e n t r a t e d u r i n g a S P I K E y e a r i s s u b s t a n t i a l l y h i g h e r t h a n i n t h e a d j a c e n t y e a r s a n d d r o p s o n l y g r a d u a l l y t o w a r d s i t s l e v e l i n t (cid:0) 1 ( F i g u r e s 1 d , 2 c ) . T h i s i s v e r y i n t e r e s t i n g a s i t p r o v i d e s p r i m a f a c i e e v i d e n c e t h a t l u m p y a d j u s t m e n t i s p r e c e d e d a n d 9 f o l l o w e d b y s m o o t h a d j u s t m e n t . T h e n a t u r a l c o n c l u s i o n i s t h a t b o t h n o n - c o n v e x a n d 1 0 c o n v e x c o s t s o f a d j u s t i n g c a p i t a l a r e i m p o r t a n t f o r p l a n t i n v e s t m e n t d e c i s i o n s . T h e g r o w t h r a t e o f o u t p u t i s p o s i t i v e b o t h b e f o r e a n d a f t e r t h e s p i k e ( F i g u r e s 1 c , 2 b ) . P l a n t s g r o w o n a v e r a g e b e f o r e t h e s p i k e i n t e r m s o f b o t h l a b o r a n d c a p i t a l i n p u t ( F i g u r e s 1 d , 1 f , 2 c , 2 e ) . I n f a c t , t h e c a p i t a l - l a b o r i n t e n s i t y f a l l s b e f o r e t h e s p i k e , i n d i c a t i n g t h a t p l a n t s i n c r e a s e t h e i r l a b o r i n p u t , a r e l a t i v e l y m o r e (cid:13) e x i b l e f a c t o r , i n a n t i c i p a t i o n o f t h e m a s s i v e c a p i t a l b u i l d - u p ( F i g u r e s 1 h , 2 g ) . O v e r t i m e h o u r s a r e u s e d m o r e i n t e n s i v e l y e s p e c i a l l y d u r i n g t h e s p i k e a n d t h e r e i s m i l d e v i d e n c e t h a t h o u r s p e r w o r k e r a r e h e i g h t e n e d b e f o r e 8 B r e s n a h a n a n d R a m e y ( 1 9 9 4 ) (cid:12) n d t h a t c h a n g e s in a c t u a l n u m b e r o f s h ift s a r e lo n g - la s t in g a n d in d ic a t e la r g e s w in g s in d e m a n d fa c in g t h e p la n t . T h e id e a is t h a t v a r ia t io n in t h e n u m b e r o f s h if t s is s u b j e c t t o s ig n i(cid:12) c a n t (cid:12) x e d c o s t s . T h is is t h e m o t iv a t io n fo r t h e m e a s u r e I u s e h e r e . H o w e v e r , I c o m p a r e s h ift w o r k a t t w o d i(cid:11) e r e n t le v e ls o f p r o d u c t io n a t a g iv e n p o in t in t im e t h a t r a t h e r t h a n o v e r t w o c o n s e c u t iv e p e r io d s s in c e I d o n o t h a v e h ig h - fr e q u e n c y d a t a a t m y d is p o s a l. 9 I t is im p o r t a n t t o n o t e t h a t t h e p a t t e r n s h o w n h e r e is n o t g e n e r a t e d b y a v a r y in g in t e n s it y o f p la n t s s w it c h in g b e t w e e n t w o s t a t e s o f in v e s t m e n t a c t iv it y : o n e o f in a c t iv it y a n d o n e o f a d is c r e t e s p ik e . A b o u t (cid:0) t t 5 0 % o f t h e p la n t s in v o lv e d in a S P I K E h a v e in v e s t m e n t r a t e b e t w e e n 0 .1 0 a n d 0 .2 0 in 1 . F o r + 1 a n d t + 2 t h e c o r r e s p o n d in g fr a c t io n is a b o u t 3 0 % a n d 2 5 % . A s im ila r s t a t e m e n t c a n b e m a d e fo r t h e s h a r e o f p la n t s t h a t h a v e in v e s t m e n t r a t e b e t w e e n 0 .0 2 a n d 0 .1 0 . 1 0 T h e s t r e n g t h o f t h is c o n c lu s io n is m it ig a t e d b y p o s s ib le m e a s u r e m e n t p r o b le m s t h a t le a d t o a s in g le s p ik e b e in g s p r e a d o v e r t w o c o n s e c u t iv e y e a r s . N o t e , h o w e v e r , t h a t s u c h \ m u lt iy e a r - s p ik e " p r o b le m s d o (cid:0) t t n o t in (cid:13) u e n c e + 2 in v e s t m e n t , w h ic h is q u it e e le v a t e d c o m p a r e d t o 2 in v e s t m e n t . 9
t a i h o t t y t d t (cid:13) (cid:12) 2 c o a d t g m C a l i e h e s p i k e ( F i g u r e s 1 j , 2 f ) . C a p i t a l u t i l i z a t i o n , a s m e a s u r e d b y t h e w o r k q u a r t e r o f c a p i t a l , l s o i n c r e a s e s b e f o r e a n d d u r i n g t h e s p i k e ( F i g u r e 1 k ) . A f t e r t h e s p i k e , t h e c a p i t a l - l a b o r n t e n s i t y r i s e s e v e n t h o u g h e m p l o y m e n t c o n t i n u e s t o i n c r e a s e . T h e u s e o f o v e r t i m e h o u r s , o u r s p e r w o r k e r , t h e w o r k q u a r t e r o f c a p i t a l a l l f a l l a f t e r t h e s p i k e . A n o t h e r i n t e r e s t i n g b s e r v a t i o n i s t h a t t h e m a t e r i a l s t o c a p i t a l u s e a n d e l e c t r i c i t y t o c a p i t a l u s e r i s e b e f o r e h e s p i k e a n d d r o p s h a r p l y t h e r e , w h i l e t h e r a t i o o f m a t e r i a l s a n d e n e r g y t o l a b o r i s (cid:13) a t h r o u g h o u t ( F i g u r e s 1 h , 2 g ) . T h e t y p i c a l p l a n t e x p e r i e n c i n g a s p i k e i n c r e a s e s i t s o u t p u t b y a b o u t 9 % i n t h e f o u r e a r s b e t w e e n t (cid:0) 2 a n d t + 2 ( 1 0 % i n t h e B A L A N C E D - L R D ) . I n f a c t , t h e d a t a s h o w h a t t h e a n n u a l r a t e o f g r o w t h i s a s h i g h b e t w e e n t (cid:0) 3 a n d t (cid:0) 2 . T h e d a t a s e e m t o i s t i n g u i s h r o u g h l y t h r e e s t a g e s t o t h i s a d j u s t m e n t e p i s o d e . F i r s t , g r o w t h i s a c h i e v e d h r o u g h a g r a d u a l i n c r e a s e i n e m p l o y m e n t . A t t h e s a m e t i m e , t h e i n t e n s i t y o f u s e o f e x i b l e f a c t o r s o f p r o d u c t i o n , s u c h a s m a t e r i a l s o r e n e r g y , i s i n c r e a s e d r e l a t i v e t o q u a s i x e d f a c t o r s s u c h a s c a p i t a l o r l a b o r ( n o t e t h e c o m p a r i s o n w i t h " o t h e r " i n F i g u r e s 1 i a n d g ) . S e c o n d , t h i s p r o l o n g e d g r o w t h l e a d s t o t h e i n v e s t m e n t s p i k e , w h i c h i n c r e a s e s t h e a p i t a l - l a b o r i n t e n s i t y d r a m a t i c a l l y . A r o u n d t h e t i m e o f t h e s p i k e t h e r e i s h e i g h t e n e d u s e f t e m p o r a r y m a r g i n s o f a d j u s t m e n t s u c h a s t h e w o r k q u a r t e r o f c a p i t a l , h o u r s p e r w o r k e r , n d o v e r t i m e h o u r s . T h i r d , a f t e r t h e s p i k e t h e i n t e n s i t y o f u s e o f m a t e r i a l s a n d e n e r g y r o p s a s d o e s t h e u s e o f t h e t e m p o r a r y m a r g i n s l i s t e d a b o v e . S o m e o b s e r v a t i o n s o n t h e u t i li z a t i o n o f c a p i t a l a n d c a p a c i t y C u r i o u s l y e n o u g h , t h e r e a r e a b o u t a s m a n y p l a n t s t h a t d r o p s h i f t s d u r i n g a s p i k e a s 1 1 h e r e a r e t h a t a d d s h i f t s ( s e e F i g u r e 1 l ) . A b o u t 8 5 % o f t h e m d o n e i t h e r . T h i s h e t e r o e n e i t y i n s h i f t b e h a v i o r m e r i t s f u r t h e r s t u d y . V a r i a b l e w o r k q u a r t e r p l a n t s u s e s h i f t s f a r o r e h e a v i l y t h a n d o o t h e r p l a n t s i n o r d e r t o a c h i e v e w o r k q u a r t e r c h a n g e s ( F i g u r e 1 m ) . a p a c i t y u t i l i z a t i o n i s h e i g h t e n e d a n d (cid:13) a t b e f o r e a n d d u r i n g t h e s p i k e b u t f a l l s s i g n i (cid:12) c a n t l y f t e r w a r d s . T h u s , a f t e r a s p i k e o u t p u t g r o w t h i s n e g a t i v e l y c o r r e l a t e d w i t h c a p a c i t y u t i i z a t i o n a t t h e p l a n t l e v e l . T h i s i s i n s h a r p c o n t r a s t t o t h e w e l l - k n o w n p o s i t i v e c o r r e l a t i o n n a g g r e g a t e d a t a b e t w e e n o u t p u t g r o w t h a n d c a p a c i t y u t i l i z a t i o n . F i n a l l y , t h e d a t a s h e d s o m e l i g h t i n t o t h e a s s u m p t i o n t h a t e n e r g y o r m a t e r i a l s u s e m a y 1 1 A r e la t e d fa c t is t h a t a S P I K E is a b o u t a s lik e ly t o b e a c c o m p a n ie d b y a P O S E G a s b y a N E G E G v e n t . 1 0
p ( c p t p T w 5 F d m c c A ( m 3 p d j i w a n o t r o x y f o r c a p i t a l u t i l i z a t i o n . T h i s a s s u m p t i o n w a s f o r m a l i z e d b y J o r g e n s o n a n d G r i l i c h e s 1 9 6 7 ) a n d B u r n s i d e e t a l . ( 1 9 9 5 ) a s : C a p i t a l S e r v i c e s = m i n f K (cid:2) U ; P g , w h e r e U i s a p i t a l u t i l i z a t i o n a n d P i s t h e p r o x y . O p t i m i z i n g p l a n t s , t h e n , c h o o s e P = U (cid:2) K , a r e d i c t i o n t h a t i s n o t v a l i d a t e d i n t h e d a t a w h e n u s i n g e i t h e r m a t e r i a l s o r e n e r g y f o r P a n d h e w o r k q u a r t e r f o r U . T h i s m a y b e s e e n i n F i g u r e 1 . i , w h i c h s h o w s t h a t t h e r a t i o o f t h e r o x y t o c a p i t a l s e r v i c e s ( K (cid:2) U ) i s f a r f r o m c o n s t a n t d u r i n g t h e a v e r a g e S P I K E e p i s o d e . h i s i s t r u e e v e n f o r v a r i a b l e w o r k q u a r t e r p l a n t s w h e r e i d e n t i f y i n g U w i t h t h e o b s e r v a b l e 1 2 o r k q u a r t e r s e e m s r e a s o n a b l e ( s e e F i g u r e s 1 . u a n d 1 . w ) . . 2 L a r g e D e c r e a s e s i n E m p l o y m e n t i g u r e s 3 a n d 4 d i s p l a y t h e d y n a m i c b e h a v i o r o f p l a n t v a r i a b l e s a r o u n d e p i s o d e s o f l u m p y e c r e a s e s i n e m p l o y m e n t ( N E G E G ) . I n b o t h s a m p l e s , t h e p l a n t s t h a t r e d u c e t h e i r e m p l o y e n t d r a m a t i c a l l y s e e m t o b e q u i t e r e p r e s e n t a t i v e o f t h e p o p u l a t i o n i n t e r m s o f t e c h n o l o g y l a s s a n d t h e n u m b e r o f s h i f t s t h e y u s e . T h e s e e p i s o d e s a r e c h a r a c t e r i z e d b y d r a m a t i c o l l a p s e s i n o u t p u t ( F i g u r e s 3 c , 4 b ) : 1 5 % b e t w e e n t (cid:0) 2 a n d t ( 1 7 % i n B A L A N C E D - L R D ) . f t e r t h e m a s s i v e (cid:12) r i n g s o u t p u t s t a b i l i z e s . T h e v a r i a b l e c a p t u r i n g s t a t e o f d e m a n d b a s e d o n s h i f t b e h a v i o r s e n d s v e r y c l e a r s i g n a l s F i g u r e 3 a ) . T h e p r o p o r t i o n o f p l a n t s f a c i n g l o w d e m a n d ( s t a t e s 2 a n d 5 ) i n c r e a s e s d r a a t i c a l l y a t t a n d , c o r r e s p o n d i n g l y , t h e p r o p o r t i o n o f p l a n t s f a c i n g h i g h d e m a n d ( s t a t e s a n d 6 ) f a l l s t o n e a r l y z e r o . H o w e v e r , s o m e o f t h e s e c h a n g e s a r e s h o r t - l i v e d a n d d o n o t e r s i s t i n t o t h e f o l l o w i n g y e a r o r t w o . T h e r e d u c t i o n i n o u t p u t i s a c h i e v e d m o s t l y t h r o u g h r e d u c e d e m p l o y m e n t o f b o t h p r o u c t i o n a n d n o n - p r o d u c t i o n w o r k e r s ( F i g u r e s 3 e , 3 f , 3 g , 4 d , 4 e , 4 f ) . T h e p a t t e r n o f a d u s t m e n t , h o w e v e r , i s m a r k e d l y d i (cid:11) e r e n t f o r t h e s e t w o g r o u p s . A l m o s t a l l o f t h e r e d u c t i o n n p r o d u c t i o n w o r k e r s i s a c h i e v e d i n o n e y e a r , b e t w e e n t (cid:0) 1 a n d t : F o r n o n - p r o d u c t i o n o r k e r s , i n s t e a d , t h e a d j u s t m e n t s e e m s t o b e r e l a t i v e l y s m o o t h o v e r t h e (cid:12) v e o b s e r v e d y e a r s 1 3 n d o n l y s e e m s t o i n t e n s i f y a b i t a t t + 1 : T h i s a c c o r d s w i t h m a n y s t u d i e s (cid:12) n d i n g t h a t o n - p r o d u c t i o n w o r k e r s a r e m o r e c o s t l y t o a d j u s t t h a n p r o d u c t i o n w o r k e r s . B y t h e e n d 1 2 B a s u ( 1 9 9 5 ) , h o w e v e r , p r o p o s e s a d i(cid:11) e r e n t fo r m u la t io n fo r c a p it a l s e r v ic e s t h a t c o n s t r a in s t h e e la s t ic it y (cid:2) K U f t h e p r o x y w it h r e s p e c t t o t o b e c o n s t a n t b u t n o t n e c e s s a r ily u n it a r y . T h is fo r m u la t io n c a n b e U e s t e d a ls o b y id e n t ify in g w it h t h e o b s e r v a b le w o r k q u a r t e r . 1 3 (cid:0) (cid:0) t t B e h a v io r b e t w e e n 3 a n d 2 m a y b e r e a d fr o m g r a p h s o f t h e g r o w t h r a t e . 1 1
o f t + 2 , t h e s k i l l r a t i o h a s i n c r e a s e d b u t t h i s c o u l d b e b e c a u s e t h e a d j u s t m e n t o f n o n p r o d u c t i o n w o r k e r s i s n o t c o m p l e t e y e t . T h e i n v e s t m e n t r a t e d o e s n o t f a l l m u c h d u r i n g t h e 1 4 e p i s o d e y e t c a p i t a l s e e m s t o f a l l a b i t b y t + 2 ( F i g u r e s 3 d , 4 c ) . E n e r g y u s e a n d m a t e r i a l s u s e s h o w a g r e a t d e a l o f (cid:13) e x i b i l i t y ( F i g u r e s 3 h , 4 g ) . T h e i r r a t i o t o c a p i t a l f a l l s i n t , t h e f a l l b e i n g d i s p r o p o r t i o n a t e l y l a r g e r f o r m a t e r i a l s . T h i s i s a p u z z l e w i t h i n a f r a m e w o r k o f a C E S p r o d u c t i o n f u n c t i o n i f a l l f a c t o r s a r e (cid:13) e x i b l e a n d t h e r e a r e n o s y s t e m a t i c m o v e m e n t s i n t h e i r r e l a t i v e p r i c e s . T h e p u z z l e m a y b e r e s o l v e d , h o w e v e r , b y c o n s i d e r i n g t h a t t h e c a p i t a l s t o c k i s c o n s i d e r a b l y l e s s (cid:13) e x i b l e ( m o r e q u a s i - (cid:12) x e d ) t h a n l a b o r , o r m a t e r i a l s . T h u s , l a b o r a n d m a t e r i a l s r e s p o n d m o r e p r o m p t l y t o s h o c k s w i t h c a p i t a l r e s p o n s e l a g g i n g . V a r i a t i o n s i n e n e r g y - c a p i t a l r a t i o s t r a c k v e r y c l o s e l y t h e w o r k q u a r t e r o f c a p i t a l f o r v a r i a b l e - w o r k q u a r t e r p l a n t s ( F i g u r e 3 u ) . T h e w o r k q u a r t e r o f c a p i t a l f a l l s q u i t e d r a m a t i c a l l y b e t w e e n t (cid:0) 2 a n d t ( a b o u t 4 . 5 % ) a n d s t a y s a t l o w l e v e l s f o r t w o m o r e y e a r s ( F i g u r e 3 k ) . A b o u t 1 0 % o f t h e p l a n t s r e d u c e t h e i r s h i f t s b y t h e e v e n t y e a r , t , a n d t h e s e c h a n g e s s e e m t o p e r s i s t u n t i l t + 2 ( F i g u r e 3 l ) . T h e r e i s a l s o a s m a l l f r a c t i o n o f p l a n t s w h i c h , h a v i n g a d d e d s h i f t s a y e a r b e f o r e t h e e v e n t ( t (cid:0) 1 ) , d i s p l a y o n l y a t e m p o r a r y d e c r e a s e i n s h i f t s i n t . S h i f t c h a n g e s a c c o u n t f o r a b o u t 2 0 % o f w o r k q u a r t e r c h a n g e s a t t t h o u g h t h i s n u m b e r v a r i e s g r e a t l y b y t e c h n o l o g y c l a s s ( F i g u r e 3 m ) . F o r v a r i a b l e w o r k q u a r t e r p l a n t s t h e p r o p o r t i o n i s a b o u t 3 5 % w h e r e a s f o r c o n t i n u o u s p r o c e s s o r s i t i s z e r o . T h e i m p o r t a n c e o f c h a n g e s i n s h i f t u s e f o r d e c r e a s i n g t h e w o r k q u a r t e r e x p l a i n s t o s o m e e x t e n t t h e p e r s i s t e n c e i n t h e r e d u c t i o n o f t h e w o r k q u a r t e r . H o u r s p e r w o r k e r a n d o v e r t i m e u s e f a l l t e m p o r a r i l y b e f o r e t ( F i g u r e 3 j ) . H o u r s p e r 1 5 w o r k e r r e c o v e r p r o m p t l y a s e m p l o y m e n t d r o p s . T h e w e l l - k n o w n f a c t t h a t a g g r e g a t e h o u r s p e r w o r k e r f a l l i n r e c e s s i o n s s h o u l d b e c o n t r a s t e d w i t h t h e p a t t e r n o b s e r v e d a t t h e p l a n t l e v e l d u r i n g r a p i d e m p l o y m e n t c o n t r a c t i o n s . A f t e r t h e b u l k o f t h e a d j u s t m e n t i n e m p l o y m e n t h a s b e e n c o m p l e t e d , h o u r s p e r w o r k e r r e t u r n t o h i g h e r l e v e l s e v e n t h o u g h o u t p u t s t a y s a t l o w l e v e l s . C a p a c i t y u t i l i z a t i o n f a l l s a b o u t s e v e n p e r c e n t a g e p o i n t s b e t w e e n t (cid:0) 2 a n d t a n d s t a r t s t o p i c k u p o n l y t o w a r d s t h e e n d o f t + 1 ( F i g u r e 3 n ) . T h e c o r r e l a t i o n b e t w e e n p l a n t o u t p u t a n d c a p a c i t y u t i l i z a t i o n i s c l e a r l y p o s i t i v e d u r i n g t h i s a d j u s t m e n t e p i s o d e i n 1 4 T h is m a y b e a s c e r t a in e d b y c o m p a r in g t h e o b s e r v e d d e c r e a s e in e m p lo y m e n t t o t h e o b s e r v e d c a p it a lla b o r in t e n s it y . 1 5 T h is d y n a m ic p a t t e r n u n d e r lie s t h e (cid:12) n d in g in C a b a lle r o e t a l. ( 1 9 9 7 ) o f n e g a t iv e c o r r e la t io n b e t w e e n h o u r s p e r w o r k e r a n d e m p lo y m e n t . 1 2
c 5 F e u w m a i ( B a s h I a i T s s a u l (cid:13) t i i o n t r a s t t o w h a t i s o b s e r v e d a f t e r a n i n v e s t m e n t s p i k e . . 3 L a r g e I n c r e a s e s i n E m p l o y m e n t i g u r e s 5 a n d 6 d i s p l a y t h e d y n a m i c b e h a v i o r o f p l a n t v a r i a b l e s a r o u n d e p i s o d e s o f l u m p y m p l o y m e n t i n c r e a s e s ( P O S E G ) . I n b o t h s a m p l e s , c o n t i n u o u s p r o c e s s o r s a r e s u b s t a n t i a l l y n d e r - r e p r e s e n t e d i n t h e e v e n t p o p u l a t i o n c o m p a r e d t o t h e t o t a l p o p u l a t i o n . V a r i a b l e o r k q u a r t e r p l a n t s , o n t h e c o n t r a r y , a r e s u b s t a n t i a l l y o v e r - r e p r e s e n t e d . T h e i m b a l a n c e i s o s t p r o n o u n c e d i n t h e M A T C H E D s a m p l e . A n n u a l o u t p u t g r o w s b y 2 4 % i n M A T C H E D ( 2 0 % i n B A L A N C E D - L R D ) b e t w e e n t (cid:0) 2 n d t + 1 ( F i g u r e s 3 c , 4 b ) . A s w a s t h e c a s e w i t h N E G E G e v e n t s , e m p l o y m e n t a d j u s t m e n t s t h e m a i n m a r g i n f o r o u t p u t a d j u s t m e n t . P r o d u c t i o n w o r k e r s i n c r e a s e b y a b o u t 2 9 % 2 5 % i n B A L A N C E D - L R D ) a n d t h i s a d j u s t m e n t i s q u i t e r a p i d ( F i g u r e s 5 e , 5 f , 6 d , 6 e ) . I n A L A N C E D - L R D i t i s a c c o m p l i s h e d w i t h i n a y e a r ! I n c o n t r a s t , n o n - p r o d u c t i o n w o r k e r s ’ d j u s t m e n t i s s m o o t h a n d d r a w n o u t o v e r a t l e a s t f o u r y e a r s . B y t h e e n d o f t + 2 , t h e k i l l e d w o r k e r s ’ s h a r e o f e m p l o y m e n t d e c r e a s e s b y a b o u t 1 1 % t h o u g h t h i s m a y r e (cid:13) e c t t h a t i r i n g s o f n o n - p r o d u c t i o n w o r k e r s a r e p l a n n e d t o c o n t i n u e b e y o n d t + 2 ( F i g u r e s 5 g , 6 f ) . n v e s t m e n t r a t e s g o u p b y a b o u t 4 p e r c e n t a g e p o i n t s ( i n B A L A N C E D - L R D ) b e t w e e n t (cid:0) 2 n d t a n d t h e n c o m e d o w n ( F i g u r e s 5 d , 6 c ) . T h e r e s u l t i n g i n c r e a s e i n t h e c a p i t a l s t o c k s n o t e n o u g h s u Æ c i e n t t o p r e v e n t t h e c a p i t a l - l a b o r i n t e n s i t y f r o m d e c r e a s i n g a b o u t 1 2 % . h e r e i s s o m e i n d i c a t i o n , h o w e v e r , t h a t t h i s i n t e n s i t y k e e p s g o i n g u p a f t e r t + 2 t h r o u g h m o o t h i n c r e a s e s i n t h e c a p i t a l s t o c k b y p l a n t s . T h i s i s c o n s i s t e n t w i t h t h e e x i s t e n c e o f i g n i (cid:12) c a n t c o n v e x c o s t s i n a d j u s t i n g c a p i t a l . R e g a r d i n g t h e a d j u s t m e n t o f m a t e r i a l s a n d e l e c t r i c i t y t h e o b s e r v e d d y n a m i c p a t t e r n s r e a l m o s t m i r r o r i m a g e s o f t h o s e o b s e r v e d i n N E G E G ( F i g u r e s 5 h , 5 i , 6 g ) . M a t e r i a l s s e m o v e s a l m o s t i n l o c k - s t e p w i t h l a b o r h o u r s , w h e r e a s e n e r g y m o v e s p r o p o r t i o n a t e l y e s s . T h u s , t h e p u z z l e r e g a r d i n g C E S p r o d u c t i o n f u n c t i o n p r e d i c t i o n s w h e n i n p u t s a r e f u l l y e x i b l e a p p e a r s h e r e t o o . H o u r s p e r w o r k e r a n d o v e r t i m e u s e a r e h e i g h t e n e d j u s t b e f o r e t h e m a s s i v e h i r i n g s a n d h e y f a l l a f t e r w a r d s ( F i g u r e s 5 j , 6 f ) . A s i n N E G E G t h e u s e o f t h e h o u r s - p e r - w o r k e r m a r g i n s r e l a t i v e l y s h o r t - l i v e d . T h e w o r k q u a r t e r o f c a p i t a l i n c r e a s e s a b i t a n d s t a y s h i g h f a c i l i t a t n g i n c r e a s e d c a p i t a l s e r v i c e s ( F i g u r e 5 k ) . A b o u t 1 1 % o f t h e p l a n t s i n c r e a s e t h e n u m b e r o f 1 3
s b d p 5 A t o a t t c u C t f s C s 6 I G e b h i f t s b e t w e e n t (cid:0) 2 a n d t + 2 ( F i g u r e 5 l ) . I n t e r e s t i n g l y , s o m e 3 % o f p l a n t s d e c r e a s e s h i f t s e t w e e n t (cid:0) 2 a n d t (cid:0) 1 a n d m a i n t a i n l o w e r s h i f t s e v e n a s t h e y a d d e x t r a w o r k e r s l a t e r . T h e y n a m i c p a t t e r n o f c a p a c i t y u t i l i z a t i o n i s t h e s a m e a s t h a t o f o u t p u t l e a d i n g t o a s t r o n g o s i t i v e c o r r e l a t i o n b e t w e e n t h e t w o v a r i a b l e s ( F i g u r e 5 n ) . . 4 C o n t r a s t i n g E m p l o y m e n t - a d j u s t m e n t t o C a p i t a l - a d j u s t m e n t E p i s o d e s k e y d i (cid:11) e r e n t i a t i n g f a c t i n t h e o u t p u t a d j u s t m e n t e p i s o d e s I s t u d y i n t h i s p a p e r i s t h a t h o s e b a s e d p r i m a r i l y o n l u m p y c h a n g e s i n e m p l o y m e n t a c h i e v e a c o n s i d e r a b l y g r e a t e r u t p u t c h a n g e . T h e a v e r a g e o u t p u t c h a n g e b e t w e e n t (cid:0) 2 a n d t + 2 i s a b o u t 1 0 % f o r S P I K E 1 6 s o p p o s e d t o a b o u t - 2 0 % f o r N E G E G a n d a b o u t 2 0 % f o r P O S E G . I n b o t h t y p e s o f e p i s o d e s t h e r e i s a m u l t i t u d e o f a d j u s t m e n t m a r g i n s u s e d . S o m e a r e e m p o r a r y s u c h a s o v e r t i m e u s e a n d h o u r s p e r w o r k e r . I n t h e c a s e o f h o u r s p e r w o r k e r , h e y r e a c h t h e i r p e a k ( o r t r o u g h ) t h e y e a r p r i o r t o a l u m p y e m p l o y m e n t a d j u s t m e n t b u t o n t e m p o r a n e o u s l y w i t h a l u m p y c a p i t a l a d j u s t m e n t . T h e w o r k q u a r t e r o f c a p i t a l a n d s h i f t s e a r e a l s o v a r i e d d u r i n g t h e e p i s o d e s s t u d i e d h e r e w i t h d i (cid:11) e r e n t l e v e l s o f p e r s i s t e n c e . h a n g e s i n t h e w o r k q u a r t e r t e n d t o b e t e m p o r a r y d u r i n g a S P I K E i n i n v e s t m e n t w h i l e h e y t e n d t o p e r s i s t d u r i n g l u m p y e m p l o y m e n t a d j u s t m e n t ( N E G E G a n d P O S E G ) . A a c t o r c o n t r i b u t i n g t o t h i s d i (cid:11) e r e n c e i s t h a t t h e l a t t e r e p i s o d e s i n v o l v e c o n s i d e r a b l e u s e o f h i f t c h a n g e s . O f c o u r s e , t h e m a i n m a r g i n s u s e d i n t h e s e e p i s o d e s a r e c a p i t a l a n d l a b o r , b y d e (cid:12) n i t i o n . h a n g e s i n t h e s e f a c t o r s s e e m t o b e l o n g - l i v e d a n d t h e y a r e e x e c u t e d i n b o t h l u m p y a n d m o o t h f a s h i o n s ( s o m e t i m e s e v e n w i t h i n t h e s a m e e p i s o d e ) . P r o d u c t i v i t y g r o w t h n o w f o c u s o n t h e b e h a v i o r o f p l a n t p r o d u c t i v i t y d u r i n g e p i s o d e s o f e x t r e m e a d j u s t m e n t . i v e n t h e e v i d e n c e o f p r o c y c l i c a l l a b o r p r o d u c t i v i t y ( L P ) i n a g g r e g a t e d a t a , o n e m i g h t 1 7 x p e c t t h a t w h e n a p l a n t i n c r e a s e s o u t p u t i t s p r o d u c t i v i t y r i s e s t o o a n d v i c e v e r s a . N o 1 6 T h e s e (cid:12) g u r e s a r e fo r t h e B A L A N C E D - L R D s a m p le . 1 7 O f c o u r s e , it c o u ld b e t h e c a s e t h a t t h e p r o c y c lic a l a g g r e g a t e p a t t e r n is d u e t o r e s o u r c e r e a llo c a t io n e t w e e n e s t a b lis h m e n t s o v e r t h e b u s in e s s c y c le ( s e e B a s u a n d F e r n a ld , 1 9 9 7 ) . I n o t h e r w o r d s , t h e w it h in 1 4
s l c ( ( o 6 T t s n i M t t b a w w (cid:11) s m i v b u c h m o n o t o n i c p a t t e r n e m e r g e s a t t h e p l a n t l e v e l ( F i g u r e s 1 p , 2 i , 3 p , 4 i , 5 p , 6 i ) . I n f a c t , a b o r p r o d u c t i v i t y a t t h e p l a n t l e v e l d u r i n g a s p i k e e p i s o d e s t a y s r a t h e r (cid:13) a t u n t i l t h e n e w a p i t a l i s i n s t a l l e d a n d t h e n d r o p s t e m p o r a r i l y . D u r i n g a n e m p l o y m e n t r e d u c t i o n e p i s o d e N E G E G ) l a b o r p r o d u c t i v i t y a c t u a l l y r i s e s w h i l e i t f a l l s d u r i n g a n e m p l o y m e n t e x p a n s i o n P O S E G ) . I n o r d e r t o u n d e r s t a n d t h e s e p a t t e r n s b e t t e r w e n e e d t o e x a m i n e t h e b e h a v i o r f t o t a l f a c t o r p r o d u c t i v i t y ( T F P ) . . 1 I n v e s t m e n t s p i k e s a n d T F P o t a l F a c t o r P r o d u c t i v i t y ( T F P ) s h o w s a p r e c i p i t o u s d r o p o f a b o u t 4 % o n e y e a r a f t e r 1 8 h e s p i k e f o r p l a n t s i n M A T C H E D . I t s t a r t s t o r e c o v e r s l o w l y a b o u t t w o y e a r s a f t e r t h e 1 9 p i k e . A d j u s t i n g f o r c a p i t a l u t i l i z a t i o n , a s m e a s u r e d b y t h e w o r k q u a r t e r o f t h e p l a n t , d o e s o t c h a n g e t h i s p a t t e r n . W h a t c o u l d e x p l a i n t h i s l a r g e d r o p a n d s u b s e q u e n t s l o w r e c o v e r y n T F P ? i s m e a s u r e m e n t i n t h e c a p i t a l s t o c k S u p p o s e t h a t t h e p l a n t (cid:12) n d s i t o p t i m a l t o r e t i r e s o m e o l d e q u i p m e n t a t t h e s a m e t i m e h a t i t a u g m e n t s i t s s t o c k w i t h n e w e q u i p m e n t . T h e p e r p e t u a l i n v e n t o r y m e t h o d u s e d i n h e c o n s t r u c t i o n o f t h e c a p i t a l s t o c k , K , w o u l d n o t r e (cid:13) e c t t h i s r e t i r e m e n t a n d T F P w o u l d e b i a s e d d o w n w a r d . T h i s a r g u m e n t i s p l a u s i b l e , t h o u g h , a s I s h o w b e l o w , i t c a n e x p l a i n t b e s t a s m a l l f r a c t i o n o f t h e T F P d r o p . T h e f a m i l i a r g r o w t h a c c o u n t i n g f o r m u l a i s (cid:1) t f p = (cid:1) y (cid:0) (cid:11) (cid:1) u (cid:0) (cid:11) (cid:1) k (cid:0) (cid:12) (cid:1) l (cid:0) (cid:13) (cid:1) m ; ( 2 ) h e r e (cid:1) i s t h e (cid:12) r s t - d i (cid:11) e r e n c e o p e r a t o r , t f p ; y ; u ; l ; k ; m r e f e r t o l o g s o f T F P , g r o s s o u t p u t , o r k q u a r t e r o f c a p i t a l , l a b o r i n p u t , m e a s u r e d c a p i t a l s t o c k , a n d m a t e r i a l s r e s p e c t i v e l y , a n d ; (cid:12) ; (cid:13) a r e t h e i r r e s p e c t i v e e l a s t i c i t i e s . U s i n g t h e a v e r a g e n u m b e r s c o n t a i n e d i n t h e (cid:12) g u r e s f o r t h e M A T C H E D s a m p l e a n d e t t i n g (cid:11) = 0 : 1 0 , (cid:12) = 0 : 3 5 , a n d (cid:13) = 0 : 5 5 a s a v e r a g e s h a r e s t h e i d e n t i t y h o l d s e x a c t l y f o r a e a s u r e d T F P g r o w t h b e t w e e n t a n d t + 2 o f (cid:0) 4 : 1 % . S u p p o s e t h a t t h e p l a n t r e t i r e d 8 % o f t s o l d c a p i t a l c o n t e m p o r a n e o u s l y w i t h t h e s p i k e . T h e n , c o r r e c t l y m e a s u r e d c a p i t a l i n t + 1 a r ia t io n is o v e r w h e lm e d b y t h e b e t w e e n v a r ia t io n . 1 8 t : t I n t h e B A L A N C E D - L R D s a m p le t h e d r o p is 1 .7 % in + 1 a n d a n a d d it io n a l 0 4 % in + 2 . 1 9 T h is s lo w r e c o v e r y is e v id e n t in b o t h M A T C H E D a n d B A L A N C E D - L R D . T F P g r o w s b y a b o u t 0 .5 % t t e t w e e n + 2 a n d + 3 . 1 5
2 0 w o u l d b e o n l y 9 5 % o f m e a s u r e d c a p i t a l . T h e c o r r e s p o n d i n g T F P g r o w t h r a t e w o u l d s t i l l b e (cid:0) 3 : 6 % . I f t h e a v e r a g e p l a n t r e t i r e d 1 6 % o f i t s o l d c a p i t a l , i n s t e a d , a r a t h e r u n r e a l i s t i c 2 1 2 2 a s s u m p t i o n , t h e T F P g r o w t h w o u l d b e (cid:0) 3 : 0 % ; s t i l l s u b s t a n t i a l . T o c o n c l u d e , m i s m e a s u r e m e n t o f t h e c a p i t a l s t o c k d u e t o r e t i r e m e n t s e e m s t o p l a y l i t t l e r o l e i n t h e d r o p o f T F P a f t e r a n i n v e s t m e n t s p i k e . E m b o d i e d T e c h n o lo g y a n d L e a r n i n g E (cid:11) e c t s A n a t t r a c t i v e h y p o t h e s i s i s t h a t t h e i n v e s t m e n t s p i k e i n v o l v e s t h e i n t r o d u c t i o n i n t h e p l a n t o f n e w t e c h n o l o g y e m b o d i e d i n t h e i n s t a l l e d e q u i p m e n t . I n t h e e a r l y p h a s e s o f i t s i n c o r p o r a t i o n i n t o p r o d u c t i o n t h i s n e w t e c h n o l o g y m a y b e o p e r a t e d i n e Æ c i e n t l y b e c a u s e n e w s k i l l s a n d e x p e r i e n c e n e e d t o b e d e v e l o p e d g r a d u a l l y . T h e r e s u l t i s a d r o p i n T F P i m m e d i a t e l y a f t e r t h e i n t r o d u c t i o n o f n e w t e c h n o l o g y w i t h g r a d u a l r e c o v e r y e n s u i n g t h e r e a f t e r . G r e e n w o o d a n d J o v a n o v i c ( 1 9 9 8 ) p r e s e n t a n i c e a g g r e g a t e m o d e l f o r t h i s h y p o t h e s i s , 2 3 w h i c h I a d a p t a n d s i m p l i f y h e r e t o m o d e l p l a n t p r o d u c t i v i t y i n i s o l a t i o n . C o n s i d e r a p l a n t t h a t l i v e s f o r t h r e e p e r i o d s ( t = 0 ; 1 ; 2 ) a n d i s e n d o w e d w i t h c a p i t a l 0 s t o c k k . T h e p l a n t d e c i d e s h o w m u c h t o p r o d u c e a n d h o w m u c h t o i n v e s t a t t = 0 a n d t = 1 . E a c h v i n t a g e o f c a p i t a l l a s t s f o r t w o p e r i o d s o n l y ( o n e - h o s s - s h a y d e p r e c i a t i o n ) . T h e p l a n t o n l y p r o d u c e s a t t = 2 b u t d o e s n o t i n v e s t a s i t t a k e s o n e p e r i o d t o b u i l d n e w c a p i t a l . (cid:0) 1 (cid:11) (cid:11) P r o d u c t i o n w i t h e v e r y v i n t a g e i s a d d i t i v e l y s e p a r a b l e a n d i s g i v e n b y : y = z k l ; v ;t v ;t v ;t v w h e r e v = 0 ; 1 d e n o t e s v i n t a g e , a n d z i s v i n t a g e - s p e c i (cid:12) c T F P . I a s s u m e t h a t t h e n e w 1 v i n t a g e o f c a p i t a l , k , e m b o d i e s n e w t e c h n o l o g y t h a t m a k e s i t m o r e p r o d u c t i v e t h a n t h e s a m e a m o u n t o f i n v e s t m e n t o f o l d v i n t a g e . I n p a r t i c u l a r 1 u n i t o f t h e n e w v i n t a g e i s e q u i v a l e n t t o q u n i t s o f o l d v i n t a g e i n t e r m s o f p r o d u c t i v e e Æ c i e n c y ( q > 1 ) . T h e p l a n t 2 0 I c a lc u la t e d t h is u n d e r t h e a s s u m p t io n t h a t t h e e x p o n e n t ia l d e p r e c ia t io n r a t e is 1 0 % a n d t h e a v e r a g e : in v e s t m e n t r a t e d u r in g a s p ik e is 0 4 0 . 2 1 I lo o k e d a t c a p it a l r e t ir e m e n t d a t a ( w h e n a v a ila b le ) fo r 1 9 7 3 - 8 8 fo r B A L A N C E D - L R D . E q u ip m e n t r e t ir e m e n t s a v e r a g e a b o u t 4 .6 % d u r in g a S P I K E w h e r e a s s t r u c t u r e s r e t ir e m e n t s a b o u t 3 .1 % . T h e s e n u m b e r s a r e s lig h t ly lo w e r w h e n n o t r e s t r ic t in g t o S P I K E y e a r s . T h e d is t r ib u t io n o f r e t ir e m e n t s is v e r y s k e w e d . F o r e x a m p le , 7 4 % o f p la n t s h a v e e q u ip m e n t r e t ir e m e n t s b e t w e e n 0 a n d 4 % w h e r e a s 1 0 % o f p la n t s h a v e e q u ip m e n t r e t ir e m e n t s g r e a t e r t h a n 1 0 % . 2 2 I p e r fo r m e d a s im ila r c o u n t e r fa c t u a l e x p e r im e n t fo r B A L A N C E D - L R D w it h s im ila r r e s u lt s . F o r e x t t a m p le , a llo w in g 8 % r e t ir e m e n t s o n a v e r a g e d u r in g a S P I K E r e d u c e s - t o - + 2 d r o p in T F P b y a b o u t 1 7 p e r c e n t o n ly . F in a lly , I r e p e a t e d t h is e x e r c is e a t t h e p la n t le v e l t o a v o id p o s s ib le a g g r e g a t io n b ia s e s w it h s im ila r c o n c lu s io n s . 2 3 T h e a b o v e p a p e r a ls o c o n t a in s m a n y r e fe r e n c e s t o o t h e r p a p e r s d e v e lo p in g a n d p r o v id in g e v id e n c e fo r t h e h y p o t h e s is o f in v e s t m e n t - s p e c i(cid:12) c t e c h n o lo g ic a l c h a n g e a n d le a r n in g e (cid:11) e c t s . 1 6
m t f c m m a i i c C t R c t p w a s l s n 6 D d a n a g e r s k n o w t h i s b u t g r o w t h a c c o u n t a n t s m a y n o t . F i n a l l y , I m o d e l l e a r n i n g e (cid:11) e c t s w i t h 0 0 0 1 h e a s s u m p t i o n t h a t w h e r e a s z = z = Z , t h e n e w v i n t a g e h a s a l o w e r T F P t e m p o r a r i l y ; ; 1 1 1 2 o r i t s i n i t i a l p e r i o d o f o p e r a t i o n : z = ( 1 (cid:0) (cid:20) ) Z ; a n d z = Z : ; ; I d o n o t m o d e l w h y t h e p l a n t i n v e s t s a n d h o w m u c h a s i t i s n o t n e c e s s a r y i n o r d e r t o 0 a l c u l a t e p r o d u c t i v i t y g r o w t h . I n s t e a d , I a s s u m e t h a t t h e p l a n t i n v e s t s (cid:13) k s o t h a t ( m i s - ) ^ 1 0 1 0 e a s u r e d k = (cid:13) k w h e r e a s t r u e k = (cid:13) q k . O n e c a n s h o w t h a t d u e t o e q u a l i z a t i o n o f t h e a r g i n a l p r o d u c t o f l a b o r a c r o s s v i n t a g e s , a v e r a g e l a b o r p r o d u c t i v i t y i s c o n s t a n t a s l o n g s t h e r e a l w a g e r a t e i s c o n s t a n t . M i s - m e a s u r e d T F P g r o w t h b e t w e e n t = 1 a n d t = 2 1 = (cid:11) s (cid:0) (cid:11) l o g ( R ) w h e r e R = [ 1 + (cid:13) ] = [ 1 + q (cid:13) ( 1 (cid:0) (cid:20) ) ] . I t i s c l e a r f r o m t h i s e x p r e s s i o n t h a t n t h e a b s e n c e o f l e a r n i n g e (cid:11) e c t s , (cid:20) = 0 , a n i n c r e a s e i n T F P s h o u l d b e o b s e r v e d . A d r o p 1 = (cid:11) a n o n l y b e o b s e r v e d i f q ( 1 (cid:0) (cid:20) ) < 1 , t h a t i s , i f t h e l e a r n i n g e (cid:11) e c t i s s t e e p e n o u g h . 1 = (cid:11) ^ ^ o r r e c t l y - m e a s u r e d T F P g r o w t h i s (cid:0) (cid:11) l o g ( R ) w h e r e R = [ 1 + q (cid:13) ] = [ 1 + q (cid:13) ( 1 (cid:0) (cid:20) ) ] . S o , r u e T F P s t a y s c o n s t a n t a f t e r a s p i k e i f (cid:20) = 0 b u t d r o p s i f (cid:20) > 0 . e la t e d O b s e r v a t i o n s T h e f a c t t h a t l a b o r p r o d u c t i v i t y s h o w s a t e m p o r a r y d e c l i n e a s w e l l , p r o v i d e s a d d i t i o n a l o r r o b o r a t i n g e v i d e n c e f o r l e a r n i n g e (cid:11) e c t s . I t a l s o i n d i c a t e s a p o s s i b l e f a i l u r e t o e q u a l i z e h e m a r g i n a l p r o d u c t o f l a b o r a c r o s s v i n t a g e s . M o s t l i k e l y , t h e a s s u m p t i o n o f p e r f e c t e x o s t (cid:13) e x i b i l i t y i n s u b s t i t u t i n g l a b o r f o r c a p i t a l i s v i o l a t e d . A n e x a m p l e o f s u c h a v i o l a t i o n o u l d b e i f w o r k e r s a n d m a c h i n e s w e r e c o m b i n e d i n (cid:12) x e d p r o p o r t i o n s . I t i s n o t e w o r t h y t h a t p l a n t s i n c r e a s e t h e s h a r e o f n o n - p r o d u c t i o n w o r k e r s i n e m p l o y m e n t 2 4 f t e r a s p i k e . T h i s s h a r e i n c r e a s e s b y 1 . 5 % t w o y e a r s a f t e r t h e s p i k e ( F i g u r e 2 f ) . V a r i o u s t u d i e s h a v e a r g u e d t h a t t h i s s h a r e i s a m e a s u r e o f t h e r e l a t i v e l e v e l o f s k i l l o f a p l a n t ’ s a b o r f o r c e . T h u s , t h e i n c r e a s e i n t h e s h a r e o f n o n - p r o d u c t i o n w o r k e r s a f t e r a s p i k e m a y b e e e n a s e v i d e n c e f o r h y p o t h e s e s t h a t p o s i t t h a t s k i l l e d l a b o r i s m o r e e Æ c i e n t a t a d o p t i n g a e w t e c h n o l o g y o r u s i n g c a p i t a l i n g e n e r a l . . 2 T F P d u r i n g L u m p y E m p l o y m e n t A d j u s t m e n t u r i n g e p i s o d e s o f l u m p y d e c r e a s e s i n e m p l o y m e n t ( N E G E G ) T F P d i s p l a y s w h a t m a y b e e s c r i b e d b e s t a s a " V " - s h a p e d p a t h w i t h t h e t r o u g h b e i n g i n t h e e v e n t y e a r ( F i g u r e s 3 p , 4 i ) . 2 4 T h is is t r u e in B A L A N C E D - L R D t h o u g h n o t in M A T C H E D . 1 7
T t d s s l s a r T a e ( a a m r l I t s f p n w c c h e " V " - s h a p e d p a t h i n p r o d u c t i v i t y t o g e t h e r w i t h t h e " L " - s h a p e d p a t h i n o u t p u t i m p l y h a t d u r i n g e x t r e m e r e d u c t i o n s i n p l a n t e m p l o y m e n t , p r o d u c t i v i t y a n d o u t p u t s h o w t w o i s t i n c t p a t t e r n s o f c o m o v e m e n t . B e f o r e a n d d u r i n g t h e e v e n t , o u t p u t a n d p r o d u c t i v i t y h o w a p r o n o u n c e d p o s i t i v e c o m o v e m e n t w h e r e a s a f t e r w a r d s t h i s i s n o t t h e c a s e . T h e i m p l e p a t t e r n o f p r o c y c l i c a l p r o d u c t i v i t y i n a g g r e g a t e d a t a i s n o t o b s e r v e d a t t h e p l a n t e v e l . T h e s h a r p d r o p i n T F P i n t h e e v e n t y e a r , e v e n a d j u s t e d f o r c a p i t a l u t i l i z a t i o n , a n d u b s e q u e n t r e c o v e r y s e e m s t o b e e v i d e n c e f o r t h e i m p o r t a n c e o f i n t e r n a l a d j u s t m e n t c o s t s s s o c i a t e d w i t h c h a n g e s i n t h e s c a l e o f o p e r a t i o n s . C h a n g e s i n t h e s i z e o f t h e w o r k f o r c e 2 5 e d u c e p r o d u c t i v i t y t e m p o r a r i l y a s p l a n t s r e a r r a n g e a n d d i s r u p t t h e p r o d u c t i o n p r o c e s s . h e e v i d e n c e f o r i n t e r n a l a d j u s t m e n t c o s t s i s s t r e n g t h e n e d w h e n o n e c o n s i d e r s t h a t p l a n t s r e m o s t l i k e l y t o b e (cid:12) r i n g w o r k e r s w i t h r e l a t i v e l y l o w p r o d u c t i v i t y . I t i s i n t e r e s t i n g t o n o t e t h a t p l a n t s w h o s e t e c h n o l o g y i s c l a s s i (cid:12) e d a s O T H E R d o n o t x p e r i e n c e t h i s d r o p a n d s u b s e q u e n t r e c o v e r y i n T F P ( F i g u r e 4 n ) . C o r r a d o a n d M a t t e y 1 9 9 7 ) h a v e a r g u e d t h a t t h e s e p l a n t s u t i l i z e (cid:13) e x i b l y o p e r a t e d w o r k s t a t i o n s r a t h e r t h a n r i g i d s s e m b l y l i n e s . T h e t y p i c a l e x a m p l e t h a t t h e y p r o v i d e i s t h a t o f a p p a r e l e s t a b l i s h m e n t s t h a t r e a c o l l e c t i o n o f s e w i n g m a c h i n e s d o i n g t h e s a m e j o b . T h i s o r g a n i z a t i o n o f p r o d u c t i o n i n i m i z e s i n t e r d e p e n d e n c e o f p r o d u c t i v e u n i t s w i t h i n t h e p l a n t a s w o r k s t a t i o n s c a n f u n c t i o n a t h e r i n d e p e n d e n t l y o f o n e a n o t h e r . T h u s , l a r g e - s c a l e (cid:12) r i n g s o f e m p l o y e e s w o u l d b r i n g i t t l e d i s r u p t i o n i n t h e r e m a i n i n g o p e r a t i o n s . R e g a r d i n g l a b o r h o a r d i n g , i t i s f a i r t o s a y t h a t i t i s p r a c t i c a l l y e x c l u d e d b y c o n s t r u c t i o n . t i s u n l i k e l y t h a t p l a n t s f o r e c a s t e d t h e d r o p i n t h e i r p r o (cid:12) t a b i l i t y ( a n d o u t p u t ) t o b e e m p o r a r y c r e a t i n g a s t r o n g i n c e n t i v e f o r l a b o r h o a r d i n g . T h i s i s e v i d e n t f r o m t h e e x t r e m e i z e o f e m p l o y m e n t r e d u c t i o n s t h a t t h e y c h o s e . I n f a c t , o u t p u t a n d e m p l o y m e n t r e m a i n (cid:13) a t o r a t l e a s t t w o y e a r s a f t e r t h e (cid:12) r i n g s . H o w e v e r , t h e o b s e r v a t i o n s h e r e d o n o t r u l e o u t t h e o s s i b i l i t y t h a t l a b o r h o a r d i n g m a y b e i m p o r t a n t i n i n s t a n c e s o f l e s s d r a m a t i c a d j u s t m e n t . D u r i n g l u m p y i n c r e a s e s i n e m p l o y m e n t ( P O S E G ) , t h e p a t t e r n o f T F P i s n o t v e r y p r o o u n c e d . D u r i n g t h e e v e n t T F P s t a y s r e l a t i v e l y (cid:13) a t w h i l e i t f a l l s a f t e r w a r d s . I t i s n o t c l e a r h a t l e s s o n s o n e c o u l d d r a w f r o m t h i s e x c e p t t h a t t h e h y p o t h e s i s o f i n t e r n a l a d j u s t m e n t o s t s d o e s n o t f a r e s o w e l l . A p o s s i b l e i n t e r p r e t a t i o n o f t h e e v i d e n c e i s t h a t s u c h c o s t s a r e 2 5 S e e B a ily e t a l. ( 1 9 9 6 ) fo r a d is c u s s io n o f t h e s e c o s t s a n d e v id e n c e t h a t t h e y a r e im p o r t a n t fo r e x p la in in g h a n g e s in a v e r a g e la b o r p r o d u c t iv it y a t t h e p la n t le v e l. 1 8
a f h t p 7 T w ( t i l w w s o o f w a o a l i c c w s y m m e t r i c . T h i s w o u l d b e p u z z l i n g , a s o n e w o u l d e x p e c t a d j u s t m e n t c o s t s t o b e h e a v i e r o r h i r i n g t h a n f o r (cid:12) r i n g d u e t o i n v e s t m e n t n e e d e d i n s p e c i (cid:12) c t r a i n i n g . A n a l t e r n a t i v e y p o t h e s i s i s t h a t i n t e r n a l a d j u s t m e n t c o s t s a r e s y m m e t r i c b u t t a k e e (cid:11) e c t w i t h a l a g i n h e c a s e o f r a p i d h i r i n g s . W i t h o u t d o u b t , a s t r u c t u r a l f r a m e w o r k i s n e c e s s a r y i n o r d e r t o r o c e e d f u r t h e r . S u m m a r y o f r e s u l t s h i s p a p e r l o o k e d a t e p i s o d e s o f d r a m a t i c o u t p u t a d j u s t m e n t b y p l a n t s . T h e s e e p i s o d e s e r e c l a s s i (cid:12) e d a c c o r d i n g t o w h e t h e r t h e m a i n m a r g i n o f a d j u s t m e n t w a s e m p l o y m e n t N E G E G a n d P O S E G ) o r c a p i t a l ( S P I K E ) . T h e p a t t e r n s t h a t e m e r g e d w e r e q u i t e i n e r e s t i n g . T h r o u g h o u t t h e s e e p i s o d e s t h e r e i s e v i d e n c e o f b o t h l u m p y a n d s m o o t h c h a n g e s n e m p l o y m e n t a n d c a p i t a l . I n p a r t i c u l a r , i n v e s t m e n t s p i k e s s e e m t o b e p r e c e d e d a n d f o l o w e d b y s m o o t h i n c r e a s e s i n c a p i t a l . W h e n p l a n t s u n d e r t a k e l u m p y c h a n g e s i n p r o d u c t i o n o r k e r s ’ e m p l o y m e n t t h i s a d j u s t m e n t i s c o m p l e t e d o n a v e r a g e w i t h i n t h e c o u r s e o f a y e a r h e r e a s t h e a c c o m p a n y i n g a d j u s t m e n t i n t h e e m p l o y m e n t o f n o n - p r o d u c t i o n w o r k e r s i s p r e a d o u t o v e r s e v e r a l y e a r s . I n d e p e n d e n t o f t h e t y p e o f a d j u s t m e n t , p l a n t s u s e o t h e r m a r g i n s a l s o . T h e i n t e n s i t y f m a t e r i a l s a n d e n e r g y u s e i s a d j u s t e d i n a n t i c i p a t i o n o f t h e l u m p y c h a n g e i n c a p i t a l r e m p l o y m e n t . H o u r s p e r w o r k e r a n d o v e r t i m e u s e d i s p l a y t e m p o r a r y c h a n g e s a i m e d a t a c i l i t a t i n g t h e a d j u s t m e n t i n t h e n e a r t e r m . A n i n t e r e s t i n g o b s e r v a t i o n i s t h a t h o u r s p e r o r k e r a n d o u t p u t a t t h e p l a n t l e v e l s h o w a n o n - l i n e a r r e l a t i o n s h i p t h a t i s n o t d e s c r i b e d c c u r a t e l y b y a s i m p l e s t a t e m e n t o f p o s i t i v e c o r r e l a t i o n b e t w e e n t h e m . T h e w o r k q u a r t e r f c a p i t a l i s a d j u s t e d t o p r o v i d e t h e d e s i r e d c h a n g e i n c a p i t a l s e r v i c e s . T h i s i s r e v e r s e d f t e r a S P I K E b u t n o t a f t e r a P O S E G o r N E G E G e v e n t r e (cid:13) e c t i n g t h e f a c t t h a t d u r i n g t h e a t t e r t w o e p i s o d e s m a n y p l a n t s c h a n g e t h e i r s h i f t b e h a v i o r . T h e c a p i t a l w o r k q u a r t e r a n d , n p a r t i c u l a r , t h e s h i f t m a r g i n s a r e u t i l i z e d b y v a r i a b l e w o r k q u a r t e r p l a n t s m o r e t h a n b y 2 6 o n t i n u o u s p r o c e s s o r s . T h e r e s u l t s s u g g e s t t h a t v a r i a t i o n s i n t h e e n e r g y - o r m a t e r i a l s a p i t a l r a t i o m a y n o t p r o x y w e l l f o r v a r i a t i o n s i n t h e c a p i t a l w o r k q u a r t e r , e v e n f o r v a r i a b l e o r k q u a r t e r p l a n t s . 2 6 M a t t e y a n d S t r o n g in ( 1 9 9 5 ) a ls o d o c u m e n t t h is fa c t e x t e n s iv e ly . 1 9
a l i i o e s t e o o o n t o c P l a n t s v a r y t h e u t i l i z a t i o n o f t h e i r p r o d u c t i v e c a p a c i t y q u i t e s u b s t a n t i a l l y d u r i n g t h e s e d j u s t m e n t e p i s o d e s . I n e m p l o y m e n t a d j u s t m e n t s c a p a c i t y u t i l i z a t i o n i s p o s i t i v e l y c o r r e a t e d w i t h p l a n t o u t p u t . H o w e v e r , d u r i n g e x p a n s i o n s o f o u t p u t t h a t a r e a s s o c i a t e d w i t h n v e s t m e n t s p i k e s c a p a c i t y u t i l i z a t i o n f a l l s . T h e d y n a m i c b e h a v i o r o f p l a n t p r o d u c t i v i t y i s v e r y i n t e r e s t i n g . I t p r o v i d e s s o m e e v d e n c e o f l e a r n i n g e (cid:11) e c t s a s s o c i a t e d w i t h t h e i n t r o d u c t i o n o f n e w t e c h n o l o g y a s a r e s u l t f a S P I K E . A d d i t i o n a l l y , t h e r e s e e m s t o b e s o m e e v i d e n c e o f p r o d u c t i v i t y c o s t s t o r a p i d m p l o y m e n t a d j u s t m e n t . B o t h o f t h e s e (cid:12) n d i n g s p o i n t t o t h e i m p o r t a n c e o f o r g a n i z a t i o n a l t r u c t u r e a n d t h e i n t e r d e p e n d e n c e o f c a p i t a l a n d l a b o r i n p u t d e c i s i o n s i n u n d e r s t a n d i n g h e c o s t s o f a d j u s t m e n t . T h e y a l s o d e m o n s t r a t e t h a t p l a n t - l e v e l p r o d u c t i v i t y i s t o a l a r g e x t e n t e n d o g e n o u s . T h u s , (cid:12) n d i n g a p p r o p r i a t e i n s t r u m e n t s f o r t h e e c o n o m e t r i c e s t i m a t i o n f p r o d u c t i o n r e l a t i o n s h i p s a t t h e p l a n t l e v e l i s p a r t i c u l a r l y t r i c k y . I n g e n e r a l , t h e (cid:12) n d i n g f a p o s i t i v e s i m p l e c o r r e l a t i o n b e t w e e n p r o d u c t i v i t y a n d o u t p u t i n a g g r e g a t e d a t a i s n o t b s e r v e d a t t h e p l a n t l e v e l d u r i n g e p i s o d e s o f l u m p y a d j u s t m e n t . T h e e m p i r i c a l a p p r o a c h t h a t I e m p l o y i n t h i s (cid:12) r s t l o o k a t t h e d a t a i s d e s c r i p t i v e a n d o n - p a r a m e t r i c r a t h e r t h a n s t r u c t u r a l . T h i s s e e m s t o b e t h e b e s t w a y t o t a k e a (cid:12) r s t l o o k a t h e s e d y n a m i c r e l a t i o n s h i p s d u r i n g p l a n t a d j u s t m e n t . T h e r e i s n o d o u b t t h a t t h e e s t i m a t i o n f a s t r u c t u r a l m o d e l t h a t s p e c i (cid:12) e s t h e n a t u r e o f s h o c k s b u (cid:11) e t i n g p l a n t s a n d t h e n a t u r e o f o s t s t o a d j u s t i n g d i (cid:11) e r e n t m a r g i n s i s t h e r i g h t p a t h t o f o l l o w f r o m h e r e . 2 0
S c a L R E R B s P U v i R E F E R E N C E S B a i l y , M a r t i n N . ; B a r t e l s m a n , E r i c J . a n d H a l t i w a n g e r , J o h n . \ L a b o r P r o d u c t i v i t y : t r u c t u r a l C h a n g e a n d C y c l i c a l D y n a m i c s . " N B E R W o r k i n g P a p e r 5 5 0 3 , M a r c h 1 9 9 6 . B a s u , S u s a n t o . \ C a p i t a l U t i l i z a t i o n a n d R e t u r n s t o S c a l e : C o m m e n t . " N B E R M a c r o e o n o m i c s A n n u a l, 1 9 9 5 , p p . 1 1 0 - 1 1 7 . B a s u , S u s a n t o , a n d F e r n a l d , J o h n . \ R e t u r n s t o S c a l e i n U . S . P r o d u c t i o n : E s t i m a t e s n d I m p l i c a t i o n s . " J o u r n a l o f P o li t i c a l E c o n o m y , A p r i l 1 9 9 7 , 1 0 5 ( 2 ) , p p . 2 4 9 - 8 3 . B r e s n a h a n , T i m o t h y F . a n d R a m e y , V a l e r i e A . \ O u t p u t F l u c t u a t i o n s a t t h e P l a n t e v e l . " Q u a r t e r ly J o u r n a l o f E c o n o m i c s , 1 9 9 4 , 1 0 9 ( 3 ) , p p . 5 9 3 - 6 2 4 . B u r n s i d e , C r a i g ; E i c h e n b a u m , M a r t i n a n d R e b e l o , S e r g i o . \ C a p i t a l U t i l i z a t i o n a n d e t u r n s t o S c a l e . " N B E R M a c r o e c o n o m i c s A n n u a l, 1 9 9 5 , p p . 6 7 - 1 0 9 . C a b a l l e r o , R i c a r d o J . ; E n g e l , E d u a r d o M . R . A . a n d H a l t i w a n g e r , J o h n . \ A g g r e g a t e m p l o y m e n t D y n a m i c s : B u i l d i n g f r o m M i c r o e c o n o m i c E v i d e n c e . " A m e r i c a n E c o n o m i c e v i e w , J a n u a r y 1 9 9 7 , 8 7 ( 1 ) , p p . 1 1 5 - 3 7 . C o o p e r , R u s s e l l ; H a l t i w a n g e r , J o h n a n d P o w e r , L a u r a . \ M a c h i n e R e p l a c e m e n t a n d t h e u s i n e s s C y c l e : L u m p s a n d B u m p s . " M i m e o , N B E R W P 5 2 6 0 , 1 9 9 5 . C o r r a d o , C a r o l a n d M a t t e y , J o e . \ C a p a c i t y U t i l i z a t i o n . " J o u r n a l o f E c o n o m i c P e r p e c t i v e s , W i n t e r 1 9 9 7 , 1 1 ( 1 ) , p p . 1 5 1 - 6 7 . D o m s , M a r k a n d D u n n e , T i m o t h y . \ C a p i t a l A d j u s t m e n t P a t t e r n s i n M a n u f a c t u r i n g l a n t s . " R e v i e w o f E c o n o m i c D y n a m i c s , 1 9 9 8 , 1 , p p . 4 0 9 - 2 9 . G r e e n w o o d , J e r e m y a n d J o v a n o v i c , B o y a n . \ A c c o u n t i n g f o r G r o w t h . " M i m e o , R o c h e s t e r n i v e r s i t y , J u n e 1 9 9 8 . J o r g e n s o n , D a l e , a n d G r i l i c h e s , Z v i . \ T h e E x p l a n a t i o n o f P r o d u c t i v i t y C h a n g e . " R e i e w o f E c o n o m i c S t u d i e s , 1 9 6 7 , 3 4 , p p . 2 4 9 - 2 8 3 . H a m e r m e s h , D a n i e l S . \ L a b o r D e m a n d a n d t h e S t r u c t u r e o f A d j u s t m e n t C o s t s . " A m e r c a n E c o n o m i c R e v i e w , S e p t e m b e r 1 9 8 9 , 7 9 ( 4 ) , p p . 6 7 4 - 8 9 . 2 1
J E 1 R i H a m e r m o u r n a l o f M a t t e y , v i d e n c e f r 9 9 5 . P o w e r , e v i e w o f E S h a p i r o d e n c e . " J o e s h , D a n i e l S . a n d P f a n n , G E c o n o m i c L i t e r a t u r e , S e p t e m J o e a n d S t r o n g i n , S t e v e . \ F a o m M a n u f a c t u r i n g P l a n t s . " L a u r a . \ T h e M i s s i n g L i n k : c o n o m i c s a n d S t a t i s t i c s , 1 9 9 , M a t t h e w D . \ C a p i t a l U t i l i z u r n a l o f A p p li e d E c o n o m e t r i e r a r d S . \ A d j u s t m e n t C b e r 1 9 9 6 . c t o r U t i l i z a t i o n a n d M a r g M i m e o , F e d e r a l R e s e r v e T e c h n o l o g y , I n v e s t m e n t , 8 , p p . 3 0 0 - 3 1 3 . a t i o n a n d C a p i t a l A c c u m c s , J u l y 1 9 8 6 , 1 ( 3 ) , p p . 2 2 2 o s t s i n F a c t o r i n s f o r A d j u s t i B o a r d , W P 9 5 a n d P r o d u c t i u l a t i o n : T h e o 1 1 - 2 3 4 . n v r D g 1 i y e m O u 2 , M t y . " a n a t d n d p u a r T E . " t : c h h e v -
\ o o t m c f a c s a a S S S S S S S t A P P E N D I X T h i s A p p e n d i x c o n t a i n s t h e d e (cid:12) n i t i o n s o f t h e v a r i a b l e s u s e d i n t h e a n a l y s i s . C a p a c i t y : P l a n t o p e r a t i o n s a t c a p a c i t y a r e t e r m e d i n t h e S u r v e y o f P l a n t C a p a c i t y a s P r e f e r r e d l e v e l o f o p e r a t i o n s . " T h e e x a c t d e (cid:12) n i t i o n f o l l o w s . \ T h e p r e f e r r e d l e v e l o f o p e r a t i o n s i s a n i n t e r m e d i a t e l e v e l o f o p e r a t i o n s b e t w e e n a c t u a l p e r a t i o n s a n d p r a c t i c a l c a p a c i t y t h a t y o u w o u l d p r e f e r n o t t o e x c e e d b e c a u s e o f c o s t s o r t h e r c o n s i d e r a t i o n s . I m p l i c i t i n t h e i d e a o f a p r e f e r r e d l e v e l o f o p e r a t i o n s i s t h e t h e o r y t h a t h e r e i s a p r e f e r r e d l e v e l o f o p e r a t i o n s a t w h i c h p r o (cid:12) t s a r e m a x i m i z e d . T h i s i s a l e v e l w h e r e a r g i n a l r e v e n u e e q u a l s m a r g i n a l c o s t s . T h e p r e f e r r e d l e v e l s h o u l d n o t e x c e e d p r a c t i c a l a p a c i t y . " \ P r a c t i c a l c a p a c i t y i s t h e g r e a t e s t l e v e l o f o u t p u t t h i s p l a n t c a n a c h i e v e w i t h i n t h e r a m e w o r k o f a r e a l i s t i c w o r k p a t t e r n , a n o r m a l p r o d u c t m i x , a n d t h e s c h e d u l e , m a c h i n e r y , n d e q u i p m e n t a l r e a d y i n p l a c e a n d r e a d y t o o p e r a t e . " I u s e t h e p r e f e r r e d d e (cid:12) n i t i o n a s i t c o r r e s p o n d s q u i t e c l o s e l y t o e c o n o m i c c o n c e p t s o f a p a c i t y t h a t i n c o r p o r a t e c o s t c o n s i d e r a t i o n s . T h e p r a c t i c a l d e (cid:12) n i t i o n , o n t h e o t h e r h a n d , e e m s c l o s e r t o a n e n g i n e e r i n g n o t i o n o f c a p a c i t y b e s t d e s c r i b e d a s \ r u n n i n g t h e m a c h i n e s l l o u t . " C a p a c i t y u t i li z a t i o n : A c t u a l p r o d u c t i o n / p r e f e r r e d p r o d u c t i o n . A S t a t e o f D e m a n d : T h e s t a t e o f p l a n t o p e r a t i o n s d e s c r i b e d i n t e r m s o f a c t u a l s h i f t s ( S ) C n d p r e f e r r e d c a p a c i t y s h i f t s ( S ) w o r k e d p e r d a y . A C t a t e = 1 i f S = 1 a n d S = 1 A C t a t e = 2 i f S = 1 a n d S = 2 o r 3 A C t a t e = 3 i f S = 2 a n d S = 1 A C t a t e = 4 i f S = 2 a n d S = 2 A C t a t e = 5 i f S = 2 a n d S = 3 A C t a t e = 6 i f S = 3 a n d S = 1 o r 2 A C t a t e = 7 i f S = 3 a n d S = 3 . W o r k q u a r t e r o f c a p i t a l: T h e h o u r s w o r k e d p e r d a y t i m e s t h e d a y s w o r k e d p e r w e e k i m e s t h e w e e k s w o r k e d p e r q u a r t e r . C h a n g e i n w o r k q u a r t e r d u e t o s h i f t c h a n g e s : I t i s c a l c u l a t e d b y h o l d i n g t h e n u m b e r o f 2 3
d i v h t w m o d v M s p T c T a B i i B e ( a y s p e r w e e k c o n s t a n t w h i l e a l l o w i n g s h i f t s p e r d a y t o t a k e t h e i r a c t u a l v a l u e s . O u t p u t : ( T o t a l v a l u e o f s h i p m e n t s + C h a n g e i n w o r k i n p r o g r e s s i n v e n t o r y + C h a n g e n (cid:12) n i s h e d g o o d s i n v e n t o r y ) / ( s h i p m e n t s d e (cid:13) a t o r ) . L a b o r p r o d u c t i v i t y ( lo g ) : l o g ( ( T o t a l v a l u e o f s h i p m e n t s + C h a n g e i n w o r k i n p r o g r e s s i n e n t o r y + C h a n g e i n (cid:12) n i s h e d g o o d s i n v e n t o r y ) / s h i p m e n t s d e (cid:13) a t o r ) - l o g ( p r o d u c t i o n w o r k e r o u r s + n o n - p r o d u c t i o n w o r k e r h o u r s ) . N o n - p r o d u c t i o n w o r k e r h o u r s a r e c o m p u t e d b y m u l i p l y i n g t h e p l a n t ’ s n o n - p r o d u c t i o n w o r k e r s b y t h e a v e r a g e a n n u a l h o u r s o f n o n - p r o d u c t i o n o r k e r s i n t h e c o r r e s p o n d i n g t w o - d i g i t i n d u s t r y . T o t a l f a c t o r p r o d u c t i v i t y ( lo g ) : o u t p u t - a * ( t o t a l h o u r s ) - b * ( r e a l c a p i t a l s t o c k i n e q u i p e n t ) - c * ( r e a l c a p i t a l s t o c k i n s t r u c t u r e s ) - d * ( c o s t o f f u e l s + c o s t o f c o n t r a c t w o r k + c o s t f m a t e r i a l s a n d p a r t s + c o s t o f p u r c h a s e d e l e c t r i c i t y ) . T h e a b o v e v a r i a b l e s a r e i n l o g s a n d e (cid:13) a t e d u s i n g c o r r e s p o n d i n g 4 - d i g i t i n d u s t r y d e (cid:13) a t o r s . F a c t o r e l a s t i c i t i e s a r e m e a s u r e d i a a v e r a g e 4 - d i g i t i n d u s t r y c o s t s h a r e s . I n d u s t r y d a t a a r e t a k e n f r o m t h e N B E R - C E S a n u f a c t u r i n g P r o d u c t i v i t y D a t a b a s e . T h e c o s t s h a r e s f o r l a b o r i n p u t a s s u m e a 1 7 % u p p l e m e n t a r y c o s t o v e r a c t u a l w a g e s ( t h i s i s t h e m e a n e x c e s s o f t o t a l e m p l o y m e n t c o m e n s a t i o n t o w a g e s a n d s a l a r i e s i n t h e N I P A s e r i e s f o r m a n u f a c t u r i n g b e t w e e n 1 9 7 2 - 8 7 ) . h e c a p i t a l s h a r e i s c a l c u l a t e d u s i n g 2 - d i g i t B L S r e n t a l r a t e s . T o t a l f a c t o r p r o d u c t i v i t y a d j u s t e d f o r u t i li z a t i o n ( l o g ) : l o g ( T F P ) - b * ( w o r k q u a r t e r o f a p i t a l ) . C a p i t a l S t o c k : T o t a l s t o c k o f s t r u c t u r e s a n d e q u i p m e n t a t t h e b e g i n n i n g o f t h e p e r i o d . h e t w o s t o c k s w e r e c a l c u l a t e d s e p a r a t e l y u s i n g a p e r p e t u a l - i n v e n t o r y m e t h o d a n d t h e n g g r e g a t e d . N o m i n a l g r o s s i n v e s t m e n t w a s d e (cid:13) a t e d u s i n g 4 - d i g i t S I C i n v e s t m e n t d e (cid:13) a t o r s . E A d e p r e c i a t i o n r a t e s w e r e a p p l i e d a t t h e 2 - d i g i t S I C l e v e l . I n 1 9 7 2 t h e c a p i t a l s t o c k w a s n i t i a l i z e d t o g r o s s b o o k v a l u e s o f e q u i p m e n t a n d s t r u c t u r e s d e (cid:13) a t e d b y t h e r a t i o o f 2 - d i g i t n d u s t r y r e a l n e t c a p i t a l s t o c k t o i n d u s t r y n o m i n a l g r o s s c a p i t a l s t o c k ( a v a i l a b l e f r o m t h e E A ) . T E C H N O L O G Y C L A S S : C o n t i n u o u s P r o c e s s o r s a r e i n d u s t r i e s i n w h i c h t h e a v e r a g e w o r k q u a r t e r a t c a p a c i t y x c e e d s 2 0 0 0 h o u r s p e r q u a r t e r . V a r i a b le W o r k q u a r t e r i n d u s t r i e s a r e t h o s e i n w h i c h t h e a v e r a g e c o e Æ c i e n t o f v a r i a t i o n C V ) o f t h e w o r k q u a r t e r e x c e e d s t h e m e d i a n C V , u n l e s s t h e i n d u s t r y i s a l r e a d y c l a s s i (cid:12) e d 2 4
a w w o a 3 d 3 E s o o u s 3 o 2 l a r k O r k A s p c o 1 7 e s 9 6 e m c o n t i n u o u s p r o c e s s o r ( C V = q u a r t e r , a t t h e p l a n t l e v e l ) . t h e r i n d u s t r i e s i n c l u d e t h o s e q u a r t e r . c c o r d i n g t o M u r r a y F o s s , t h e r o c e s s o r s : 2 6 1 - 6 3 ; 2 8 , e x c e p t n t i n u o u s p r o c e s s o r s t h a t w e , a n d 3 3 3 3 ) . C o n v e r s e l y , w e n o t ( 2 0 4 6 , 2 0 6 3 , 2 0 7 5 , 2 0 8 3 , 3 3 5 3 , a n d 3 3 5 5 ) . S e e F o s s , e n t i n L o n g - T e r m G r o w t h . " s t a n d n o t a f o l l o 2 8 3 d o n i n c l u , 2 4 9 M u r W a s h a r d d e v i a t i o n o f a c t u a l w o r k q u a r t e r / m e a n a c t u a l l r e a d y c l a s s i (cid:12) e d a s c o n t i n u o u s p r o c e s s i n g o r v a r i a b l e w i n g t h r e e - d i g i t i n d u s t r i e s a r e c l a s s i (cid:12) e d a s c o n t i n u - 8 5 , 8 9 ; 2 9 ; a n d 3 3 1 , 3 3 3 . F o s s i n c l u d e s 1 0 i n d u s t r i e s o t ( 2 8 7 5 , 2 8 7 9 , 2 9 5 1 , 2 9 5 2 , 2 9 9 2 , 2 9 9 9 , 3 3 1 5 , 3 3 1 6 , d e 1 6 i n d u s t r i e s a s c o n t i n u o u s p r o c e s s o r s t h a t F o s s 2 , 2 6 4 6 , 2 6 6 1 , 2 8 9 5 , 3 2 2 1 , 3 2 2 9 , 3 2 4 1 , 3 2 7 4 , 3 2 7 5 , r a y F . " C h a n g i n g U t i l i z a t i o n o f F i x e d C a p i t a l : A n i n g t o n : A m e r i c a n E n t e r p r i s e I n s t i t u t e . 1 9 8 4 . 2 5
FIGURE 1: INVESTMENT SPIKE (MATCHED SAMPLE) Frequency of Technology Class a. Frequency of State Event Population Total Population 100% Continuous Processors 446 22.1% 2,611 27.8% 90% 7 80% Variable Workquarter 980 48.6% 4,127 44.0% 70% 6 Other 589 29.2% 2,639 28.1% 60% 5 50% 4 40% 3 30% 2 20% 1 10% 0% t-2 t-1 t t+1 t+2 Total Pop. b. Distribution of Events c. Total Continuous Processors Variable Workquarter Other Growth Rate of Annual Output Annual Output (log) 140 0.04 120 0.02 100 0 80 60 -0.02 40 -0.04 20 -0.06 0 81 82 83 84 85 86 -0.08 Year t-2 t-1 t t+1 t+2 other std err d. e. Equipment Investment-Capital Ratio Capital Stock (log) Growth Rate of Production Workers (Annual Average) 0.3 Growth Rate of Non-Production Workers (Annual Average) 0.03 0.2 0.02 0.1 0.01 0 0 -0.01 -0.1 -0.02 -0.2 -0.03 -0.3 -0.04 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 1: INVESTMENT SPIKE (MATCHED SAMPLE) f. g. Skilled Workers’ Share of Employment (log) Skilled Workers’ Share of Wages (log) Production Workers (Annual Average, log) Non-Production Workers (Annual Average, log) 0.03 Total Labor Hours (log) 0.06 0.02 0.04 0.01 0.02 0 0 -0.02 -0.01 -0.04 -0.02 -0.06 -0.08 -0.03 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err h. i. Energy to Capital Services Use (log) Materials to Capital Services Use (log) Energy to Capital Use (log) Materials to Capital Use (log) Capital Labor Intensity (log) 0.05 0.25 0.2 0 0.15 0.1 -0.05 0.05 0 -0.1 -0.05 -0.1 -0.15 -0.15 -0.2 -0.2 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err j. k. Overtime Hours/Total Production Worker Hours (4th Quarter) Workquarter of Capital (Annual Average, log) Actual to Capacity Workquarter (Annual Average) Actual to Capacity Hours per Worker (4th Quarter) Hours per Worker (log) 0.02 0.015 0.01 0.01 0 0.005 0 -0.01 -0.005 -0.01 -0.02 -0.015 -0.03 -0.02 -0.025 -0.04 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 1: INVESTMENT SPIKE (MATCHED SAMPLE) l. Distribution of Shift Changes Since T-2 m. Share of Change in Workquarter Due to Shift Changes Total Continuous Processors Variable Workquarter Other 1 to 2, 3 2 to 3 No Change 3 to 2,1 2 to 1 0.3 100% 0.25 80% 0.2 60% 0.15 40% 0.1 20% 0.05 0% 0 t-1 t t+1 t+2 t-1 t t+1 t+2 n. o. Capacity Utilization (4th Quarter) Capacity Utilization (Annual Average) Growth Rate of Labor Productivity Growth Rate of Total Factor Productivity 0.02 Growth Rate of TFP Utilization-Adjusted 0.03 0.01 0.02 0 0.01 -0.01 0 -0.01 -0.02 -0.02 -0.03 -0.03 -0.04 -0.04 -0.05 -0.05 -0.06 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err p. q. Actual to Capacity Workquarter (Annual Average) Continuous Processors Variable Workquarter Other Average Labor Productivity (log) Total Factor Productivity (log) TFP Utilization-Adjusted (log) 0.03 0.03 0.02 0.02 0.01 0.01 0 0 -0.01 -0.01 -0.02 -0.02 -0.03 -0.04 -0.03 -0.05 -0.04 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 1: INVESTMENT SPIKE (MATCHED SAMPLE) r. Workquarter of Capital (Annual Average, log) s. Capacity Utilization (4th Quarter) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.04 0.06 0.03 0.05 0.02 0.04 0.01 0.03 0.02 0 0.01 -0.01 0 -0.02 -0.01 -0.03 -0.02 -0.04 -0.03 -0.05 -0.04 -0.06 -0.05 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err t. Energy to Capital Use (log) u. Energy to Capital Services Use (log) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.2 0.2 0.15 0.15 0.1 0.1 0.05 0.05 0 0 -0.05 -0.05 -0.1 -0.1 -0.15 -0.15 -0.2 -0.2 -0.25 -0.25 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err v. Materials to Capital Use (log) w. Materials to Capital Services Use (log) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.15 0.15 0.1 0.1 0.05 0.05 0 0 -0.05 -0.05 -0.1 -0.1 -0.15 -0.15 -0.2 -0.2 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 2: INVESTMENT SPIKE (BALANCED-LRD SAMPLE) Frequency of Technology Class a. Distribution of Events Total Continuous Processors Variable Workquarter Other Event Population Total Population 1600 Continuous Processors 8,432 11.0% 24,923 13.5% 1400 Variable Workquarter 33,985 44.2% 82,842 44.8% 1200 Other 34,411 44.8% 77,151 41.7% 1000 800 600 400 200 0 76 77 78 79 80 81 82 83 84 85 86 87 88 89 Year b. c. Growth Rate of Annual Output Annual Output (log) Equipment Investment-Capital Ratio Capital Stock (log) 0.04 0.3 0.02 0.2 0 0.1 -0.02 0 -0.04 -0.1 -0.06 -0.2 -0.08 -0.3 -0.1 -0.4 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err d. e. Growth Rate of Production Workers (Annual Average) Production Workers (Annual Average, log) Growth Rate of Non-Production Workers (Annual Average) Non-Production Workers (Annual Average, log) Total Labor Hours (log) 0.01 0.06 0 0.04 -0.01 0.02 0 -0.02 -0.02 -0.03 -0.04 -0.06 -0.04 -0.08 -0.05 -0.1 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 2: INVESTMENT SPIKE (BALANCED-LRD SAMPLE) f. g. Skilled Workers’ Share of Employment (log) Skilled Workers’ Share of Wages (log) Energy to Capital Use (log) Materials to Capital Use (log) Hours per Worker (log) Capital Labor Intensity (log) 0.025 0.3 0.02 0.2 0.015 0.1 0.01 0.005 0 0 -0.1 -0.005 -0.01 -0.2 -0.015 -0.3 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err h. i. Growth Rate of Labor Productivity Growth Rate of Total Factor Productivity Average Labor Productivity (log) Total Factor Productivity (log) 0.01 0.005 0.005 0 0 -0.005 -0.005 -0.01 -0.01 -0.015 -0.015 -0.02 -0.02 -0.025 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err j. Annual Output (log) k. Production Workers (Annual Average, log) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.04 0.04 0.02 0.02 0 0 -0.02 -0.02 -0.04 -0.04 -0.06 -0.06 -0.08 -0.08 -0.1 -0.1 -0.12 -0.12 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 2: INVESTMENT SPIKE (BALANCED-LRD SAMPLE) l. Non-Production Workers (Annual Average, log) m. Average Labor Productivity (log) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.08 0.025 0.06 0.02 0.04 0.015 0.02 0.01 0 0.005 -0.02 0 -0.04 -0.005 -0.06 -0.01 -0.08 -0.015 -0.1 -0.02 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err n. Total Factor Productivity (log) o. Energy to Capital Use (log) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.02 0.05 0.01 0 0 -0.05 -0.01 -0.1 -0.02 -0.15 -0.03 -0.2 -0.04 -0.25 -0.05 -0.3 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err p. Materials to Capital Use (log) q. Capital Labor Intensity (log) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.05 0.3 0 0.25 -0.05 0.2 -0.1 0.15 -0.15 0.1 -0.2 -0.25 0.05 -0.3 0 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 3: NEGATIVE EMPLOYMENT GROWTH (MATCHED SAMPLE) Frequency of Technology Class a. Frequency of State Event Population Total Population 100% Continuous Processors 570 28.4% 2,611 27.8% 90% 7 80% 6 Variable Workquarter 924 46.0% 4,127 44.0% 70% 60% 5 Other 513 25.6% 2,639 28.1% 50% 4 40% 3 30% 2 20% 10% 1 0% t-2 t-1 t t+1 t+2 Total Pop. b. Distribution of Events c. Total Continuous Processors Variable Workquarter Other Growth Rate of Annual Output Annual Output (log) 0.2 200 0.15 150 0.1 100 0.05 50 0 0 81 82 83 84 85 86 -0.05 Year t-2 t-1 t t+1 t+2 other std err d. e. Equipment Investment-Capital Ratio Capital Stock (log) Growth Rate of Production Workers (Annual Average) 0.03 Growth Rate of Non-Production Workers (Annual Average) 0.02 0.25 0.01 0.2 0.15 0 0.1 -0.01 0.05 -0.02 0 -0.03 -0.05 -0.04 -0.1 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 3: NEGATIVE EMPLOYMENT GROWTH (MATCHED SAMPLE) f. g. Production Workers (Annual Average, log) Non-Production Workers (Annual Average, log) Skilled Workers’ Share of Employment (log) Total Labor Hours (log) Skilled Workers’ Share of Wages (log) 0.25 0.05 0.2 0.15 0 0.1 0.05 -0.05 0 -0.05 -0.1 -0.1 -0.15 -0.15 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err h. i. Energy to Capital Services Use (log) Materials to Capital Services Use (log) Energy to Capital Use (log) Materials to Capital Use (log) Capital Labor Intensity (log) 0.14 0.2 0.12 0.15 0.1 0.1 0.08 0.05 0.06 0 0.04 -0.05 -0.1 0.02 -0.15 0 -0.2 -0.02 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err j. k. Overtime Hours/Total Production Worker Hours (4th Quarter) Workquarter of Capital (Annual Average, log) Actual to Capacity Hours per Worker (4th Quarter) Actual to Capacity Workquarter (Annual Average) 0.05 Hours per Worker (log) 0.04 0.03 0.02 0.03 0.01 0.02 0 0.01 -0.01 -0.02 0 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 3: NEGATIVE EMPLOYMENT GROWTH (MATCHED SAMPLE) l. Distribution of Shift Changes Since T-2 m. Share of Change in Workquarter Due to Shift Changes 1 to 2, 3 2 to 3 No Change 3 to 2,1 2 to 1 Total Continuous Processors Variable Workquarter Other 100% 0.4 0.35 80% 0.3 60% 0.25 0.2 40% 0.15 0.1 20% 0.05 0% 0 t-1 t t+1 t+2 t-1 t t+1 t+2 n. o. Growth Rate of Labor Productivity Capacity Utilization (4th Quarter) Capacity Utilization (Annual Average) Growth Rate of Total Factor Productivity Growth Rate of TFP Utilization-Adjusted 0.1 0.06 0.08 0.05 0.06 0.04 0.03 0.04 0.02 0.02 0.01 0 0 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err p. q. Actual to Capacity Workquarter (Annual Average) Average Labor Productivity (log) Total Factor Productivity (log) Continuous Processors Variable Workquarter Other TFP Utilization-Adjusted (log) 0.04 0.07 0.03 0.06 0.02 0.05 0.04 0.01 0.03 0 0.02 -0.01 0.01 0 -0.02 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 3: NEGATIVE EMPLOYMENT GROWTH (MATCHED SAMPLE) r. Workquarter of Capital (Annual Average, log) s. Capacity Utilization (4th Quarter) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.06 0.1 0.05 0.08 0.04 0.03 0.06 0.02 0.04 0.01 0.02 0 -0.01 0 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err t. Energy to Capital Use (log) u. Energy to Capital Services Use (log) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.16 0.14 0.14 0.12 0.12 0.1 0.1 0.08 0.08 0.06 0.06 0.04 0.04 0.02 0.02 0 0 -0.02 -0.02 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err v. Materials to Capital Use (log) w. Materials to Capital Services Use (log) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.2 0.2 0.15 0.15 0.1 0.1 0.05 0.05 0 0 -0.05 -0.05 -0.1 -0.1 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 4: NEGATIVE EMPLOYMENT GROWTH (BALANCED-LRD SAMPLE) Frequency of Technology Class a. Distribution of Events Event Population Total Population Total Continuous Processors Variable Workquarter Other Continuous Processors 7,551 11.8% 24,923 13.5% 2500 Variable Workquarter 31,158 48.5% 82,842 44.8% 2000 Other 25,518 39.7% 77,151 41.7% 1500 1000 500 0 76 77 78 79 80 81 82 83 84 85 86 87 88 89 Year b. c. Growth Rate of Annual Output Annual Output (log) Equipment Investment-Capital Ratio Capital Stock (log) 0.25 0.03 0.02 0.2 0.01 0.15 0 -0.01 0.1 -0.02 0.05 -0.03 -0.04 0 -0.05 -0.05 -0.06 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err d. e. Production Workers (Annual Average, log) Growth Rate of Production Workers (Annual Average) Non-Production Workers (Annual Average, log) Growth Rate of Non-Production Workers (Annual Average) Total Labor Hours (log) 0.3 0.3 0.25 0.25 0.2 0.2 0.15 0.15 0.1 0.1 0.05 0.05 0 0 -0.05 -0.05 -0.1 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 4: NEGATIVE EMPLOYMENT GROWTH (BALANCED-LRD SAMPLE) f. g. Skilled Workers’ Share of Employment (log) Skilled Workers’ Share of Wages (log) Energy to Capital Use (log) Materials to Capital Use (log) Hours per Worker (log) Capital Labor Intensity (log) 0.05 0.3 0 0.2 0.1 -0.05 0 -0.1 -0.1 -0.15 -0.2 -0.2 -0.3 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err h. i. Growth Rate of Labor Productivity Growth Rate of Total Factor Productivity Average Labor Productivity (log) Total Factor Productivity (log) 0.03 0.03 0.025 0.025 0.02 0.02 0.015 0.01 0.015 0.005 0.01 0 0.005 -0.005 -0.01 0 -0.015 -0.005 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err j. Annual Output (log) k. Production Workers (Annual Average, log) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.25 0.3 0.2 0.25 0.2 0.15 0.15 0.1 0.1 0.05 0.05 0 0 -0.05 -0.05 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 4: NEGATIVE EMPLOYMENT GROWTH (BALANCED-LRD SAMPLE) l. Non-Production Workers (Annual Average, log) m. Average Labor Productivity Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.06 0.05 0.04 0.04 0.02 0.03 0 0.02 -0.02 0.01 -0.04 0 -0.06 -0.01 -0.08 -0.02 -0.1 -0.03 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err n. Total Factor Productivity (log) o. Energy to Capital Use (log) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.04 0.16 0.035 0.14 0.03 0.12 0.025 0.1 0.02 0.08 0.015 0.06 0.01 0.04 0.005 0.02 0 0 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err p. Materials to Capital Use (log) q. Capital Labor Intensity (log) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.25 0.05 0.2 0 0.15 -0.05 0.1 -0.1 0.05 -0.15 0 -0.2 -0.05 -0.25 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 5: POSITIVE EMPLOYMENT GROWTH (MATCHED SAMPLE) Frequency of Technology Class a. Frequency of State Event Population Total Population 100% 90% Continuous Processors 138 13.4% 2,611 27.8% 80% 7 6 Variable Workquarter 554 53.8% 4,127 44.0% 70% 60% 5 Other 337 32.8% 2,639 28.1% 50% 4 40% 3 30% 2 20% 1 10% 0% t-2 t-1 t t+1 t+2 Total Pop. b. Distribution of Events c. Total Continuous Processors Variable Workquarter Other Growth Rate of Annual Output Annual Output (log) 70 0.1 60 0.05 50 0 40 -0.05 30 -0.1 20 10 -0.15 0 -0.2 81 82 83 84 85 86 -0.25 Year t-2 t-1 t t+1 t+2 other std err d. e. Equipment Investment-Capital Ratio Capital Stock (log) Growth Rate of Production Workers (Annual Average) Growth Rate of Non-Production Workers (Annual Average) 0.08 0.06 0.1 0.05 0.04 0 0.02 -0.05 0 -0.1 -0.15 -0.02 -0.2 -0.04 -0.25 -0.06 -0.3 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 5: POSITIVE EMPLOYMENT GROWTH (MATCHED SAMPLE) f. g. Production Workers (Annual Average, log) Non-Production Workers (Annual Average, log) Skilled Workers’ Share of Employment (log) Total Labor Hours (log) Skilled Workers’ Share of Wages (log) 0.1 0.2 0.05 0 0.15 -0.05 0.1 -0.1 -0.15 0.05 -0.2 -0.25 0 -0.3 -0.05 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err h. i. Energy to Capital Use (log) Materials to Capital Use (log) Energy to Capital Services Use (log) Materials to Capital Services Use (log) Capital Labor Intensity (log) 0.1 0.2 0.05 0.15 0.1 0 0.05 0 -0.05 -0.05 -0.1 -0.1 -0.15 -0.15 -0.2 -0.25 -0.2 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err j. k. Overtime Hours/Total Production Worker Hours (4th Quarter) Workquarter of Capital (Annual Average, log) Actual to Capacity Hours per Worker (4th Quarter) Actual to Capacity Workquarter (Annual Average) Hours per Worker (log) 0.05 0.04 0.04 0.03 0.03 0.02 0.02 0.01 0.01 0 0 -0.01 -0.01 -0.02 -0.02 -0.03 -0.03 -0.04 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 5: POSITIVE EMPLOYMENT GROWTH (MATCHED SAMPLE) l. Distribution of Shift Changes Since T-2 m. Share of Change in Workquarter Due to Shift Changes 1 to 2, 3 2 to 3 No Change 3 to 2,1 2 to 1 Total Continuous Processors Variable Workquarter Other 100% 0.3 0.25 80% 0.2 60% 0.15 40% 0.1 20% 0.05 0% 0 t-1 t t+1 t+2 t-1 t t+1 t+2 n. o. Growth Rate of Labor Productivity Growth Rate of Total Factor Productivity Capacity Utilization (4th Quarter) Capacity Utilization (Annual Average) Growth Rate of TFP Utilization-Adjusted 0.06 0.04 0.06 0.02 0.04 0 -0.02 0.02 -0.04 0 -0.06 -0.02 -0.08 -0.1 -0.04 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err p. q. Actual to Capacity Workquarter (Annual Average) Average Labor Productivity (log) Total Factor Productivity (log) Continuous Processors Variable Workquarter Other TFP Utilization-Adjusted (log) 0.08 0.06 0.06 0.04 0.04 0.02 0.02 0 0 -0.02 -0.02 -0.04 -0.04 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 5: POSITIVE EMPLOYMENT GROWTH (MATCHED SAMPLE) r. Workquarter of Capital (Annual Average, log) s. Capacity Utilization (4th Quarter) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.1 0.15 0.08 0.1 0.06 0.05 0.04 0.02 0 0 -0.05 -0.02 -0.1 -0.04 -0.06 -0.15 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err t. Energy to Capital Use (log) u. Energy to Capital Services Use (log) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.35 0.4 0.3 0.25 0.3 0.2 0.15 0.2 0.1 0.05 0.1 0 0 -0.05 -0.1 -0.1 -0.15 -0.2 -0.2 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err v. Materials to Capital Use (log) w. Materials to Capital Services Use (log) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.25 0.3 0.2 0.2 0.15 0.1 0.1 0.05 0 0 -0.05 -0.1 -0.1 -0.2 -0.15 -0.2 -0.3 -0.25 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 6: POSITIVE EMPLOYMENT GROWTH (BALANCED-LRD SAMPLE) Frequency of Technology Class a. Distribution of Events Event Population Total Population Total Continuous Processors Variable Workquarter Other Continuous Processors 5,058 9.1% 24,923 13.5% 1400 Variable Workquarter 26,737 48.1% 82,842 44.8% 1200 1000 Other 23,792 42.8% 77,151 41.7% 800 600 400 200 0 76 77 78 79 80 81 82 83 84 85 86 87 88 89 Year b. c. Growth Rate of Annual Output Annual Output (log) Equipment Investment-Capital Ratio Capital Stock (log) 0.05 0.08 0.06 0 0.04 -0.05 0.02 -0.1 0 -0.02 -0.15 -0.04 -0.2 -0.06 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err d. e. Production Workers (Annual Average, log) Growth Rate of Production Workers (Annual Average) Non-Production Workers (Annual Average, log) Growth Rate of Non-Production Workers (Annual Average) Total Labor Hours (log) 0.05 0.1 0.05 0 0 -0.05 -0.05 -0.1 -0.1 -0.15 -0.15 -0.2 -0.2 -0.25 -0.25 -0.3 -0.3 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 6: POSITIVE EMPLOYMENT GROWTH (BALANCED-LRD SAMPLE) f. g. Skilled Workers’ Share of Employment (log) Energy to Capital Use (log) Materials to Capital Use (log) Skilled Workers’ Share of Wages (log) Capital Labor Intensity (log) Hours per Worker (log) 0.2 0.2 0.15 0.15 0.1 0.05 0.1 0 -0.05 0.05 -0.1 -0.15 0 -0.2 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err h. i. Growth Rate of Labor Productivity Growth Rate of Total Factor Productivity Average Labor Productivity (log) Total Factor Productivity (log) 0.03 0.02 0.025 0.015 0.02 0.01 0.015 0.01 0.005 0.005 0 0 -0.005 -0.005 -0.01 -0.01 -0.015 -0.015 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err j. Annual Output (log) k. Production Workers (Annual Average, log) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.05 0.05 0 0 -0.05 -0.05 -0.1 -0.1 -0.15 -0.15 -0.2 -0.2 -0.25 -0.25 -0.3 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
FIGURE 6: POSITIVE EMPLOYMENT GROWTH (BALANCED-LRD SAMPLE) l. Non-Production Workers (Annual Average, log) m. Average Labor Productivity (log) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.1 0.04 0.08 0.03 0.06 0.04 0.02 0.02 0.01 0 0 -0.02 -0.01 -0.04 -0.06 -0.02 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err n. Total Factor Productivity (log) o. Energy to Capital Use (log) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.02 0.04 0.02 0.01 0 0 -0.02 -0.04 -0.01 -0.06 -0.08 -0.02 -0.1 -0.03 -0.12 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err p. Materials to Capital Use (log) q. Capital Labor Intensity (log) Continuous Processors Variable Workquarter Other Continuous Processors Variable Workquarter Other 0.05 0.2 0 0.15 -0.05 0.1 -0.1 0.05 -0.15 -0.2 0 -0.25 -0.05 t-2 t-1 t t+1 t+2 other std err t-2 t-1 t t+1 t+2 other std err
Cite this document
Plutarchos Sakellaris (2001). Patterns of Plant Adjustment (FEDS 2001-05). Board of Governors of the Federal Reserve System, Finance and Economics Discussion Series. https://whenthefedspeaks.com/doc/feds_2001-05
@techreport{wtfs_feds_2001_05,
author = {Plutarchos Sakellaris},
title = {Patterns of Plant Adjustment},
type = {Finance and Economics Discussion Series},
number = {2001-05},
institution = {Board of Governors of the Federal Reserve System},
year = {2001},
url = {https://whenthefedspeaks.com/doc/feds_2001-05},
abstract = {This paper provides a description of the dynamic choices of manufacturing plants when they undertake rapid adjustment in output. The focus is on episodes that involve lumpy adjustment in capital or employment. I examine the behavior of variables such as capital utilization, hours per worker, overtime use, capacity utilization, materials and energy use. Finally I describe the observed patterns of productivity during those adjustment episodes and propose some hypotheses that seem to fit them. The costs associated with output adjustment seem to arise from building and destroying a particular organization of the structure of production and associated worker experience. As such they are related to learning-by-doing and investment in specific training.},
}