The Comparison of Measurements of Capacity Utilization and Research of Excess Capacity

——the Empirical Research Based on Panel Data of China’s Manufacturing During 1996—2015

China Business and Market - - NEWS - Xia Fei-long (Graduate School of CASS,Beijing102488,China)

Abstract:The cost function method is a method of measuring the utilization rate of the production capacity,including the lowest point of the average cost curve and the cut- point production of the short- term cost curve and the long- term curve as potential output standards. With two potential output definitions,output at the lowest point of the average cost curve and the tangential point between short- term cost curve and the long- term curve,the author estimates China's manufacturing capacity utilization based on translog cost function and panel data of China’s manufacturing during 1996-2015. The conclusions are:first, the capacity utilization (CU) estimated by translog cost function and DEA are comparative;second,China's manufacturing industry does not make full use of economies of scale;third,the dynamic criteria of CU is more appropriate in judging excess capacity of China’s manufacturing than the static criteria,and the result using dynamic criteria is consistent with outcome of previous studies,showing that there is serious excess capacity in China's manufacturing;and fourth,the characteristics of CU of manufacturing is pro- cyclical in the period of 1996- 2007,however,under the government stimulus policy,it shows characteristics of counter-cyclical after 2008. This result shows that stimulus policy can only delay the outbreak of excess capacity but not the fundamental measure.

Key words:capacity utilization;excess capacity;translog cost function;SUE modeling


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