Elasticity of substitution and productivity, capital and skill intensity differences across firms

Abstract

This paper, instrumented with six theorems, shows that differences between firms in labor productivity, capital intensity and relative demand for skilled labor can be explained by differences in the substitution parameters between capital, skilled and unskilled labor in the presence of skill biased technical change. D

Capital-skill complementarity, productivity and wages: Evidence from plant-level data for a developing country

“…significance of the third order terms, δ jkC , and found that they were insignificant, so they were omitted. This indicates that the Dupuy and de Grip (2006) hypothesis is not supported by our data. Second, we tested for the significance of cross-terms between the IS and FS R components and the inputs, γ rj , and again omitted them due to their insignificance.…”

“…13 The possibilities that separability restrictions (resulting in a Cobb Douglas model if all restrictions are imposed), or a value added specification (that avoided potential materials endogeneity issues), might justifiably represent production processes were raised by anonymous referees. The Dupuy and de Grip (2006) hypothesis was also suggested as a testable hypothesis by an anonymous referee. significance of the third order terms, δ jkC , and found that they were insignificant, so they were omitted.…”

“…This final "preferred" model does not include the third order terms capturing the Dupuy and de Grip (2006) hypothesis of impacts on labor-capital relationships of computer use, or cross-effects between the imported capital or female labor share capturing the effects of, say, importing rather than developing technology on input substitutability and mix. It does, however, include all other input cross-terms, and thus is fully flexible in terms of inputs rather than imposing input separability.…”

“…We also wish to allow for the possibility that, as suggested by Dupuy and de Grip (2006), 10 computer use might not only directly affect production but also interact with input substitution parameters.…”

Effect of Accounting Flexibility on Earnings Management through Stock Repurchases

“…Capital intensity is adopted in the model to account for variations in firms' production input mix in terms of labor and capital (Abowd, Kramarz, & Marglis, 1999). Dupuy and Grip (2006) demonstrate that the substitution between labor and capital enables firms to generate a given amount of sales with different input factor combinations. Because the model is estimated using quarterly data, dummy variables representing quarters are added to the model to control for potential seasonal effect.…”