On the ‘utilisation controversy’: a comment

Abstract

In a recent contribution, Nikiforos (Nikiforos, M. 2016. On the utilisation controversy: a theoretical and empirical discussion of the Kaleckian model of growth and distribution, Cambridge Journal of Economics, vol. 40, no. 2, 437–67) has claimed that the FED data on capacity utilisation are stationary by construction, and thus, not suitable to test the Neo-Kaleckian model. He then proceeds to provide new series on capital utilisation, which he claims are non-stationary and provide, supposedly, support for the Neo-Kaleckian model. This comment presents two interrelated claims. First, the measurement error that Nikiforos claims to be I(1) in the FED series is I(0), and what is measured with error is only the level of the series. Thus, this series is suitable to test the Neo-Kaleckian model. Secondly, he does not provide unit root tests for the series he suggests as superior to the FED. When this exercise is carried out, almost all unit root tests decidedly reject the existence of a stochastic trend on his three proposed series, which, according to the author, do not lend support to the Neo-Kaleckian model. We conclude that measures of capacity utilisation based on FRB data are a reasonable source to test the implications of a wide variety of macroeconomic models.

On the empirical content of the convergence debate: Cross‐country evidence on growth and capacity utilisation

“…Nikiforos has recently argued that the FRB data is measured in such a way is 'stationary by construction' (Nikiforos, 2016, p. 2;2018, p. 7), as such, he disregards this series and proposes alternative series on the workweek of capital. However, as we have noted in a recent comment of his work (Gahn & González, 2019), if one agrees with the author that the FRB is stationary by assumption, then the measurement error must have a unit root. This means that surveys would be collected in such a way that (random) errors taken in each period would permanently affect the series.…”

On the 'Utilization Controversy': A Rejoinder and Some Comments

“…In this paper I outlined six reasons why I disagree with the argument put forward by Gahn and González (2019), which I think further establish that the FRB measure is not appropriate for the evaluation of the desired utilization's long-run behavior, and that the AWW-which is not stationary-is a more appropriate measure. A more interesting question for future research is whether demand contributes to this non stationarity.…”

Normal utilization rate in the Sraffa framework

“…Therefore, Nikiforos’ (2013) model cannot survive the critiques raised by the Cambridge capital controversy and as a result, the endogenous normal utilization rate solution to the utilization controversy proposed by Nikiforos (2016) is hardly sustainable. Detailed critiques concerning both theoretical and empirical analyses against Nikiforos’ (2016) endogenization solution have been provided by Girardi and Pariboni (2019) and Gahn and Gonzalez (2020, with a response by Nikiforos, 2020). We address a few additional points.…”