Sequentiality Versus Simultaneity: Interrelated Factor Demand

Abstract

Abstract:A structural model is developed and estimated by a maximum likelihood routine to investigate interrelated factor demand subject to nonconvex adjustment costs. The dataset concerns Norwegian plants operating in manufacturing industries and it covers the period 1993-2005. The estimates indicate that it is advantageous to adjust the stock of labour and capital simultaneously. The cost advantage of simultaneous changes is small for capital but is large for labour. The empirical results suggest that when estimating separate factor demand models the bias of parameter estimates is most severe in case of labour demand.JEL Codes: D92, E22, E24, J23, L60

Dynamics of Investment and Firm Performance: Comparative Evidence from Manufacturing Industries

“…Results on growth of employment, although only significant for France, are much interesting for the perspective they provide in terms of timing of the decision of hiring and investing: an increase in employment anticipates capital adjustment episodes. This finding is coherent with the results in Sakellaris (2004) and Asphjell et al (2010).…”

Dynamics of investment and firm performance: comparative evidence from manufacturing industries

“…Moreover, Sakellaris (2004) finds that employment and investment spikes are synchronized, while Asphjell et al (2010) specify that employment increases before an investment spike. Another important feature of investment determinants is related to the dynamics of investment across periods.…”

“…A growing stream of literature has indeed started to investigate the relationship between capital adjustment episodes and firm level (performance) characteristics, such as productivity 4 and its growth rate (Power, 1998;Bessen, 1999;Huggett and Ospina, 2001;Nilsen et al, 2009;Shima, 2010), employment growth (Asphjell et al, 2010), sales growth (Licandro et al, 2004) or other factors of production (Sakellaris, 2004;Nilsen et al, 2009). In particular, investment should affect productivity in the long run, as new capital embodies the latest technology (Jensen et al, 2001).…”

Differing factor adjustment costs across industries: Evidence from Japan

“…We assume that the capital and labor inputs are quasi-fixed and that the materials are freely adjustable. 1 1 Note that the capital and labor inputs become state variable and that the materials become control variable. Therefore, the materials are optimally selected following the policy function of capital and labor.…”