Capacity constraint and seasonal productivity variations at plant level

Abstract

The paper examines seasonal productivity variations by using monthly plant-level physical output and capacity data. The regression results confirm that seasonal output elasticity is substantially larger than non-seasonal elasticity not only at the industry level, but also at the plant level. The productivity becomes low in the demand-peak season particularly at plants where capacity is highly utilized, consistent with the capacity constraint interpretation. The effect of capacity constraint on productivity fluctuations, however, is modest compared with that of seasonal demand variations.