User Cost, Capital Utilization and Investment Theory

Taubman, Paul; Wilkinson, Maurice

doi:10.2307/2525663

Cited by 68 publications

(30 citation statements)

References 9 publications

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“…This model incorporates two sources of factor utilization in a real business cycle model similar to the one studied in the previous section. These include labor hording as modeled in Burnside, Eichenbaum and Rebelo (1993) and capital utilization as modeled in Greenwood, Hercowitz and Huffman (1988) and Taubman and Wilkinson (1970). Capital utilization, t u , affects both production and the rate of depreciation.…”

Section: Volatility In Model With Endogenous Factor Utilizationmentioning

confidence: 99%

Why have business cycle fluctuations become less volatile?

2007

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This paper shows that a standard Real Business Cycle model driven by productivity shocks can successfully account for the 50 percent decline in cyclical volatility of output and its components, and labor input that has occurred since 1983. The model is successful because the volatility of productivity shocks has also declined significantly over the same time period. We then investigate whether the decline in the volatility of the Solow Residual is due to changes in the volatility of some other shock operating through a channel that is absent in the standard model. We therefore develop a model with variable capacity and labor utilization. We investigate whether government spending shocks, shocks that affect the household's first order condition for labor, and shocks that affect the household's first order condition for saving can plausibly account for the change in TFP volatility and in the volatility of output, its components, and labor. We find that none of these shocks are able to do this. This suggests that successfully accounting for the post-1983 decline in business cycle volatility requires a change in the volatility of a productivity-like shock operating within a standard growth model. * We thank Stephen Parente, Ed Prescott, John Taylor, and two anonymous referees for helpful comments and suggestions.

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Section: Volatility In Model With Endogenous Factor Utilizationmentioning

confidence: 99%

Why have business cycle fluctuations become less volatile?

2007

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“…Theoretical or empirical studies which have taken this viewpoint include Taubman and Wilkinson (1970), Nadiri and Rosen (1974), Epstein and Denny (1980), Kokkelenberg (1984), Shapiro (1984), and Kollintzas and Choi (1985). However, the Taubman and Wilkinson study is purely theoretical while Nadiri and Rosen, although including depreciation-in-use in their theoretical model, ignore it in their empirical work.…”

Section: W Bischoff and E C Kokkelenbergmentioning

confidence: 99%

Capacity utilization and depreciation-in-use

Bischoff

Kokkelenberg

1987

Applied Economics

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“…Although its relationship to business cycles has long been noticed by economists (e.g., Marris [39], Lucas [38], Taubman and Wilkinson [50]), explicit analyses of capacity utilization in a dynamic general equilibrium framework are more recent. 1 An important finding of this literature is that capacity utilization can greatly amplify business cycle shocks, since it provides an additional margin to adjust the level of output.…”

Section: Introductionmentioning

confidence: 99%