Plant-level nonconvex output adjustment and aggregate fluctuations


Šustek, Roman (2011) Plant-level nonconvex output adjustment and aggregate fluctuations. Journal of Monetary Economics, 58, (4), 400-414. (doi:10.1016/j.jmoneco.2011.08.001).

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Description/Abstract

In most manufacturing industries plant-level output is adjusted along three margins of capacity utilization: shiftwork, weekend work, and closing temporarily down. Due to the discrete and lumpy nature of these margins, only a fraction of plants adjust output in response to shocks. In a business cycle model calibrated to establishment-level observations, these nonconvexities make aggregate output less volatile than when plants can adjust smoothly. Further, the mass of adjusting plants is larger in downturns than in upturns, leading to counter-cyclical volatility of aggregate output and government policy being slightly more effective in recessions than in expansions.

Item Type: Article
ISSNs: 0304-3932 (print)
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social and Human Sciences > Social Sciences > Economics
ePrint ID: 203665
Date Deposited: 17 Nov 2011 16:28
Last Modified: 27 Mar 2014 19:48
URI: http://eprints.soton.ac.uk/id/eprint/203665

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