OUTPUT FLUCTUATIONS AT THE PLANT-LEVEL

This paper examines the short-run dynamics of manufacturing costs by d etailing how plants in the U. S. automobile industry change output. We ekly data show a variety of margins on which firms'' adjust production . These margins, which are distinct from the usual factor demand choic es, differ in their lumpiness, their adjustment costs, and their varia ble costs. The existence of these margins explains several empirical p uzzles of output fluctuations. Using a theory of the short-run dynamic cost function, we are able to infer some of the characteristics of th e underlying cost function from the dynamic behavior of the different margins.