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Abstract

This article examines the problem of characterizing production structures when there is input fixity but fixed inputs can be utilized with varying intensities. Unless the rate of utilization of quasi-fixed factors is adequately measured, primal or dual characterizations of producer behavior common in the empirical literature may not be valid. The problem is overcome by specifying another input, the operating rate, which firms can use the short run to adjust to unexpected market changes when there is quasi-fixity in production. The model is applied to the Canadian pulp and paper and sawmilling industries. The results do not permit rejection of the hypotheses of quasi-fixity and varying utilization of quasi-fixed factors in the short run. A model of instantaneous adjustment of factor inputs is clearly outperformed by the quasi-fixity model incorporating an operating rate decision.

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