Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/229074
Authors: 
Boehm, Christoph E.
Pandalai-Nayar, Nitya
Year of Publication: 
2020
Series/Report no.: 
ECB Working Paper No. 2460
Abstract: 
We provide evidence that industries' supply curves are convex. To guide our empirical analysis, we develop a model, in which capacity constraints at the plant level generate convex supply curves at the industry level. The industry's capacity utilization rate is a sufficient statistic for the supply elasticity. Using data on capacity utilization and three different instruments, we estimate the supply curve and find robust evidence for an economically sizable degree of convexity. The nonlinearity we identify has several macroeconomic implications: Responses to shocks are state-dependent, the Phillips curve is convex, and higher welfare costs of business cycles than Lucas (1987).
Subjects: 
Slack
Utilization
State-Dependence
Fiscal Policy
Monetary Policy
JEL: 
E22
E32
E52
E62
F44
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-4377-2
Document Type: 
Working Paper

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