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Direct and indirect measures of capacity utilization and Economic growth: A nonparametric analysis of the Tunisian industry

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  • Kamel HELALI

    (Faculty of Economics and Management of Sfax, University of Sfax, Tunisia)

  • Maha KALAI

    (Faculty of Economics and Management of Sfax, University of Sfax, Tunisia)

Abstract

In this paper, we suggest a measure of the short run capacity utilization rates based on a reduced version of the indirect production function of Shephard. More precisely, we define the production capacity as the maximum quantity produced by the firm given the specific quantity of the quasi-fixed input and the overall budget constraint for its choice of variable inputs. The present study extends the non-parametric literature by modeling the indirect production function (restricted and unrestricted) and derives a measure of the capacity utilization rate using the DEA. We used annual data on time series on the overall output as well as the quantities and prices of the inputs published by the Tunisian Institute of Competitiveness and Quantitative Studies to measure the capacity utilization rate in the manufacturing industry for the period 1961-2010. Our empirical analysis aims to show the important variations in the capacity utilization both across industries and, over time, within the manufacturing industry.

Suggested Citation

  • Kamel HELALI & Maha KALAI, 2013. "Direct and indirect measures of capacity utilization and Economic growth: A nonparametric analysis of the Tunisian industry," E3 Journal of Business Management and Economics., E3 Journals, vol. 4(6), pages 144-155.
    • Handle: RePEc:etr:series:v:4:y:2013:i:6:p:144-155
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    References listed on IDEAS

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    2. Berndt, Ernst R & Morrison, Catherine J, 1981. "Capacity Utilization Measures: Underlying Economic Theory and an Alternative Approach," American Economic Review, American Economic Association, vol. 71(2), pages 48-52, May.
    3. Fare, Rolf & Grosskopf, Shawna & Kokkelenberg, Edward C, 1989. "Measuring Plant Capacity, Utilization and Technical Change: A Nonparametric Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(3), pages 655-666, August.
    4. Subhash C. Ray & Kankana Mukherjee & Yanna Wu, 2006. "Direct And Indirect Measures Of Capacity Utilization: A Non‐Parametric Analysis Of Us Manufacturing," Manchester School, University of Manchester, vol. 74(4), pages 526-548, July.
    5. Subhash C. Ray, 2002. "Nonparametric Measures of Capacity Utilization: A Dual Approach," Working papers 2002-35, University of Connecticut, Department of Economics.
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