Showing papers on "Capacity utilization published in 1977"

Price Determination Processes for Agricultural Sector Models

Abstract: Until recently, traditional subsector model analysis for agricultural products had focused largely on supply-acreage considerations. This was particularly true of the crops sector, where historically supply has outstripped demand, leaving market prices at support levels. Supply response equations often used the support price as the supply price, reducing even further the role of market prices. However, the disappearance of excess capacity from agriculture has shifted attention to the demand-price side of the ledger. Recent experience with worldwide grain price inflation and its impact on domestic livestock prices has reinforced the need to consider further the price determination mechanism for agricultural products. Traditional concern with supply response in an environment of excess capacity centered around the farm income problem, i.e., the relative decline of rural America. Analysis of this problem has been the prime concern of agricultural policy makers since the 1930s. On the other hand, high food prices have been the source of recent political concern, not only because of their direct effect on the cost of living but also because of "secondround" inflationary effects due to increased wage demands. These higher wages in turn lead to inflationary pressures of their own in the nonfood sectors of the economy. Hence, price determination is an appropriate topic for a session on econometric models since, as will be shown, the nonfarm economy plays a large role in that process. Economists, both agricultural and otherwise, have historically paid relatively little attention to the price determination process. For the nonfarm sector, the first serious effort at price modeling came from the EcksteinFromm price equation. A simplified version of macro model price behavior is as follows. Demand determines output; the difference between actual and potential output (i.e., unemployment) and lagged prices determine wages; wages and output determine prices. Various refinements of this basic approach are the mainstay of most aggregate models, although some have been revamped with a stage-of-processing model along the lines developed by Popkin. The price determination process for agricultural models can be summarized as fol-

Utilization of Federal Reserve Bank Services by Member Banks: Implications for the Costs and Benefits of Membership

Abstract: nfl I lIE proportion of commercial banks belonging to the Federal Reserve System has been declining for more than three decades. The percentage of banks in the Federal Reserve System decreased from 4~J. 1 per~ cent of all commercial banks in 1945 to 39.3 percent at the end of 1976 (see Chart I). The percentage of total bank deposits held at Federal Reserve member banks declined from 86.3 percent to 73.8 percent over the same period.

On the excess capacity controversy

Abstract: This paper critically reviews and resolves some controversies on the so-called “excess capacity” theorem that allegedly are deducible from the theory of monopolistic competition. The fundamental model initially focuses attention on the main sources of confusion, which are shown to relate to certain terminological ambiguities. The conditions under which an unambiguously defined excess capacity can be set forth are discussed herein. Finally, and perhaps most importantly, the paper goes beyond critiques and proposes a dynamic adjustment mechanism which would establish the properties of a full equilibrium under conditions of productive efficiency for the otherwise static framework of monopolistic competition.

A Variable-Parameter Model of Exporting Behaviour

Abstract: This paper has two purposes. The first is to introduce an econometric model of export pricing and sales behaviour, the parameters of which vary with some indicator of excess productive capacity. For the individual firm this is achieved simply by proposing that it follows a demand-constrained regime when levels of working are low, and a supplyconstrained regime when full capacity is approached. Application of this sort of model to the whole economy would lead to implausible discontinuities; as overall capacity utilization rose a switching point would be reached where factors influencing demand-world trade, competitor prices-became suddenly unimportant and those influencing supply-investment, profitability-became suddenly all-important. The second purpose of this paper is to offer a resolution of this conceptual inelegance by postulating that at any one time firms experience a variety of capacity utilization conditions distributed around means which are generally high at peaks of the domestic business cycle and low in troughs. The resulting aggregate equations exhibit no unwonted discontinuities. The potential area of application of this device is large, as all multi-regime models involve some abrupt changes in the behaviour patterns of the agents they describe. It is, however, circumscribed by the technical problems of combining the aggregation procedure with constraints on the agents' behaviour which are essentially stochastic, and by the need to fabricate data on the way the switching variable (capacity utilization) is distributed across individual agents (firms). We shall look at two versions of the export model, the first resting on the assumption that the constraints on firm behaviour share a common stochastic term, thus effectively reducing these technical problems to those of pure aggregation, the second on the more general premise that such random elements are independent. The first suffices to illustrate the important points that weighting or sample-splitting schemes are inappropriate to its estimation, and that there is a real danger of incorrectly rejecting the hypothesis that two regimes are at work if firms differ in their experience of the switching variable. The second model is developed partly to reveal a further source of bias in this direction, but mainly to catalogue the practical problems of obtaining a manageable estimating equation for a model in which independent stochastic constraints coexist with an aggregation problem. This is in fact achieved only by confining all random variables to a non-normal class of distribution functions which is tailored to produce relatively simple expressions for total exports while making full use of the meagre data available on intraindustry variations in capacity utilization. In the first section below, the basic model of the exporting firm is formalized and set in the context of current research on models with varying parameters. In the second section, aggregate equations for the economy's exports are derived and the problems of estimation and measurement posed by them are discussed. Finally, estimated equations for the volume and price of UK exports of manufactured goods are presented with special emphasis on the distinct effects of cyclical variations in the degree of capacity utilization on export demand and supply.

Dual Stability in a Cambridge-type Model

Abstract: In this paper we are concerned with the dynamic properties of a multi-firm model of the Cambridge-type. The essential feature of the model is the assumption that, in making decisions concerning investments and prices, firms lack an exact knowledge of future demands and equilibrium prices. The dual stability-instability property of Leontief models (e.g. [2], [6, pp. 81-84]) or saddle-point property of neoclassical models (e.g. [1], [3]) is essentially due to the unrealistic assumption of perfect foresight. The first object of this paper is to show that, relaxing this assumption, a dual stability property for both quantities and prices holds. As firms must create output capacity for unknown future demand, excess capacity may result when out of equilibrium. But it will be shown that a certain type of investment behaviour where the firms learn from past experience would tend to adjust the structure of productive capacity to steady-state requirements. As for the price system, full cost pricing is assumed. In the short period, the firms produce as much as they can sell at fixed prices and they then revise these prices when a change in costs occurs. Furthermore, it will be assumed that the money wage rate increases at certain periods of time and that the firms pass it on in the form of higher prices. The second object of this paper is to examine under a simple Cambridge saving condition how real phenomena such as the rate of equilibrium growth, the stability of the input-output system, and the level of real wages are affected by the bargaining power of workers as well as by the monopoly power of firms.

An empirical study of peak-load pricing and investment policies for the domestic market of gas in Great Britain

Abstract: This paper reports the main results of a study aimed at determining empirically an optimal structure of seasonal tariffs for the domestic sector of gas in Great Britain. The study first involves the development of a peak-load pricing model which maximizes social welfare. The model is then quantified with cost and demand functions which have been statistically estimated for Great Britain using data for town gas. The procedure of estimating these functions is based on an error components model. The seasonal pricing and investment policy resulting from the solution to the above model is then compared with the existing policy for the domestic sector of gas in Great Britain. It is shown that the former is superior to the latter in terms of improvements in social welfare and capacity utilization.

Investment requirements in the non‐fuel mineral sector in the developing countrie

Abstract: The order of magnitude of the capital investment requirements of the developing market economy countries in the non-fuel mineral sector between 1976 and 1985 are estimated for nine major minerals: bauxite, copper, iron ore, lead, manganese ore, nickel, phosphate rock, tin, and zinc. The proportion of this investment likely to be financed from foreign sources is also estimated. The first step in calculating investment requirements is to project consumption, production and prices for each commodity. The second step is to estimate the capital investment required per annual ton of capacity, for mining and metallurgical processing. The third step is to estimate total capital requirements for projected capacity increases during the projection period by multiplying the tonnage increases by the estimated capital cost per ton of capacity. Over 80 percent of this investment is for bauxite, copper, and iron ore. The estimates of annual investment in the non-fuel mineral sector of the developing countries from foreign sources for the two periods amount to 11.6 and 18.3 percent of the total foreign capital flow from developed to developing countries in 1975. An appendix that discusses projected investment requirements of copper in greater detail is included.

A note concerning the effect of reserve margins and regulatory policy on new turbogenerator size

Abstract: Two extensions are provided to a model of lumpy investment originally formulated by Srinivasan. The extensions are provided in the context of an electric utility. Thefirst extension shows the effect on optimal cycle time and investment size of constraining an electric utility to carry excess capacity just prior to a regeneration point. The second allows thefirm's demand to depend on price and shows that a regulatory commission by its choice of price trajectory can affect the optimal turbogenerator sizes. In the last section a discussion is provided of the empirical relevance of the analysis.