Patterns of plant adjustment$

This paper provides a description of the dynamic choices of manufacturing plants when they undertake rapid adjustment in output. The focus is on episodes that involve lumpy adjustment in capital or employment. There is evidence that these episodes involve also smooth changes in employment or capital. I examine the behavior of variables such as capital utilization, hours per worker, capacity utilization, materials and energy use. Plants use these margins of adjustment actively and in an economically meaningful way. Additionally, I describe the observed patterns of productivity during these adjustment episodes and propose some hypotheses that seem to fit them. The level of Total Factor Productivity (TFP) drops after spikes in investment or bursts in job destruction and recovers slowly afterward. These productivity costs seem to arise from the adoption of new technologies and the ensuinglearning of how to use them as well as from building and destroying a particular organization of production. Bursts of job creation are not accompanied by significant movements in TFP. r 2003 Elsevier B.V. All rights reserved.