  This study delves into the origins of excess capacity by examining the
reactions of capital, labor, and capital intensity. To achieve this, we have
employed a novel three-layered production function model, estimating the
elasticity of substitution between capital and labor as a nested layer,
alongside capital intensity, for all industry groups. We have then selectively
analyzed a few industry groups for comparative purposes, taking into account
the current government policies and manufacturing plant realities. Ultimately,
we recommend that policymakers address the issue of excess capacity by
stimulating the expansion of manufacturing plants with cutting-edge machinery.
Our findings and recommendations are intended to appeal to academics and
policymakers alike.
