Excess Capacity and Demand-Driven Business Cycles

• 成果类型: Article; Early Access
• 署名作者: Sun, Tiancheng
• 署名单位: University of Edinburgh
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdae072
• 发表日期: 2024
• 关键词: real wage cyclicality; intertemporal substitution; indivisible labor; price dispersion; INVESTMENT; time; panel; equipment; internet; choices

摘要

I build a macroeconomic model that features chronic excess capacity. Firms can use their capacity to compete for buyers who are not fully attentive to prices. If one firm expands capacity while other firms do not, it steals or attracts profitable demand from others. Theoretically, I show that this capacity competition can cause an over-accumulation of capacity. In the presence of chronic excess capacity, capital resources can be slack, and demand shocks can have large effects on output. The model is consistent with stylized facts about capacity utilization and survey evidence from Switzerland. Quantitatively, when the model is estimated to match the U.S. macro data, demand shocks turn out to be the main driving forces of business cycles.