American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Declining Volatility in the U.S. Automobile Industry
American Economic Review
vol. 96,
no. 5, December 2006
(pp. 1876–1889)
Abstract
Dramatic changes in the volatility of output occurred in the U.S. auto industry in the early 1980s. Namely, output volatility declined, the covariance of inventory investment and sales grew more negative, and adjustments to production schedules, which in earlier decades stemmed primarily from plants hiring and laying off workers, were more often accomplished with changes in average hours per worker after the mid- 1980s. Using a linear quadratic inventory model with intensive and extensive labor adjustments, we show how all of these changes could have stemmed from one underlying factor—a decline in the persistence of motor vehicle sales. (JEL G31, L25, L62, M11)Citation
Ramey, Valerie, A., and Daniel J. Vine. 2006. "Declining Volatility in the U.S. Automobile Industry." American Economic Review, 96 (5): 1876–1889. DOI: 10.1257/aer.96.5.1876Additional Materials
JEL Classification
- G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
- L23 Organization of Production
- L25 Firm Performance: Size, Diversification, and Scope
- L62 Automobiles; Other Transportation Equipment
- M11 Production Management