Capacity Utilization and Production Function Estimation: Implications for Productivity Analysis

Thus, it has operating practice with respect to the use become important to adjust for capacity of installed machines and the deployment utilization in estimating productivity func- of workers is the production capacity of the tion. [...] To reflect in the non-manufacturing goods-producing the importance of each firm in an industry industry group can be partly explained by group, capacity utilization for the indus- the high volatility of commodity price and try is the average of capacity utilization of economic activities in the mining sector. [...] For a comparison between our measured The Evaluation of the Mea- capacity utilization and the official one, the sured Capacity Utilization official capacity utilization is normalized to the average of CU1 and CU2 for manufac- How well does our estimated capacity turing over 2000-2017. [...] utilization capture the actual capacity uti- The movement pattern of the official ca- lization? In this section, we assess them by pacity utilization is in general similar to correlating our measures with the official that of our measures, although the correla- measure of capacity utilization and with tion between our measures and the official economic growth. [...] However, the size of the effect is Capacity Utilization and the not influenced by the presence of capac- Economic Performance of In- ity utilization.