Capacity Utilisation, Constraints and Price Adjustments Under the Microscope

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper analyses the interplay of capacity utilisation, capacity constraints, demand constraints and price adjustments, employing a unique firm-level data set for Swiss manufacturing firms. Theoretically, capacity constraints limit the ability of firms to expand production in the short run and lead to increases in prices. Our results show that, on the one hand, price increases are more likely during periods when firms are faced with capacity constraints. Constraints due to the shortage of labour, in particular, lead to price increases. On the other hand, we also find evidence that firms are not reluctant to reduce prices in response to demand constraints. At the macro level, the implied capacity-utilisation Phillips curve has a convex shape during periods of excess demand and a concave shape during periods of excess supply. Our results are robust to the inclusion of proxies for changes in costs and the competitive position of firms. Terms of use: Documents inJEL classification: E31; E32; E52

The NIRCU and the Phillips curve: an approach based on micro data

“…Hence, the volatility might partially be caused by the seasonality and Taylor price setting found in earlier studies (Lein 2010). Furthermore, as Lein and Köberl (2009) show, firms that are constrained to adjust their capacity in the short run are more likely to adjust prices. Hence, the firms are those that are included in the average utilization rate but not in the NIRCU.…”

The NAICU and the Phillips Curve - An Approach Based on Micro Data

“…Hence, the volatility might partially be caused by the seasonality and staggered price setting found in earlier studies (Rupprecht, 2007). Furthermore, as Lein and Köberl (2008) show, firms that are constrained to adjust their capacity in the short run are more likely to adjust prices.…”

Exchange Rate Transmission and Export Activity at the Firm Level

“…7 The same survey was analyzed by Lein and Köberl (2009);Lein (2010);and Mikosch (2011). Note that the set-up of this table and of Tables 2, 3 and A.1 is adopted from Lein (2010).…”

“…Specifically, the probability of a change in outcome y it is estimated by the following panel fixed effects logit model conditional on an observed price change (see Lein and Köberl, 2009):…”