effects of energy price rise on investment firm level evidence from indian manufacturing sector this paper analyses the effects of the rising prices of energy products on the investment of a large panel of manufacturing firms in india during 1993 2013 the prime motivation behind this study is the absence of an empirical study into this research issue exclusively on indian economy the empirical results obtained by estimating an error correction model ecm using generalized method of moments gmm show that energy price rise has negative effect on the investment of firms in the manufacturing sector the negative effect is transmitted to the firm s investment through both demand side and supply side factors the transmission also depends upon factors such as the energy intensity of production the results also show that the sales growth investment relationship becomes weak in the face of the rising prices of the energy which could be due to the cautious approach to investment adopted by the firms therefore it calls for the attention of the policy makers to evolve a comprehensive energy policy to ensure continuous supply of energy at affordable prices to the manufacturers

farmers investment behavior an empirical assessment of two specifications of expectations the capital investment decision is modeled and two different assumptions about expectations are compared and tested using panel data for dutch dairy farms the utilization of panel data allowed to account for the possibility that the intercept in the function for capital varies over the farms the models are estimated using the generalized method of moments gmm for dynamic panel data the model based on static expectations fits the data well the results obtained from the rational expectations model are not consistent with the theory

environmental policy instruments in an international duopoly with feedback investment strategies abstract this paper analyses the effects of the environmental policy instruments taxes and standards on the investment behaviour of firms in the context of an international duopoly two production factors are considered the capital stock and a polluting input the government of each country values high profits for its firm and a good environmental quality through standards on the polluting input firms get commitment on output which is not the case under taxes standards thus seem a better environmental policy instrument because for the same use of the polluting input taxes lead the duopolists to higher investment with lower profits this result was derived in a two stage game model it was confirmed in a differential game model with open loop strategies the paper shows that in a differential game model with feedback strategies an effect occurs that counteracts the first effect the cause of this is that taxes induce substitution between capital and the polluting input the conclusion is that under taxes firms invest more due to the absence of commitment but invest less due to substitution between the inputs the net effect depends on the values of the parameters taxes are better than standards for low rates of depreciation and discount for low investment costs and for high productivity of capital

intertemporal production and intertemporal substitution in output supply and input demand abstractthis article presents an intertemporal model of production with multiple inputs to investigate substitution opportunities facing firms over time the firm s intertemporal profit maximization problem is characterized with the familiar cost function and various intertemporal substitution elasticities are delineated for output supply and input demand the absence of intertemporal substitution in production can imply production smoothing and allowance for intertemporal substitution in labour demand reinforces the prediction of the real business cycle model for aggregate us manufacturing we find substantial substitution in output supply and labour demand over time due to intertemporal changes in output price and wage rates

estimation of scale economies underlying growth and productivity the empirical implications of data aggregation estimation of scale economies underlying growth and productivity patterns is typically based on aggregated data raising questions about the potential for aggregation biases this paper provides empirical evidence on the existence and patterns of such biases we use a cost based model to estimate short long run and internal external scale effects for u s manufacturing data at different aggregation levels our results suggest that aggregation biases in such a model are not substantive also internal scale economies seem more appropriately represented by the aggregate data whereas more disaggregated data appears preferable for estimation of external or spillover effects that occur between industries or sectors

factor demand models with nonlinear short run fluctuations abstract this paper considers asymmetric costs of adjustment that propagate nonlinear shortrun fluctuations in stochastic factor demand systems the model endogenously generates asymmetric cyclical demand for capital and labour between peaks and troughs of the business cycle the empirical analysis of the model is based on quarterly time series data of the dutch manufacturing sector for the period 1971 i 1984 iv and annual time series data of the u k manufacturing sector for the period 1955 1986 i find important differences of adjustment speed of capital and labour inputs between expansionary and contractionary phases of the business cycle

scale economies and over capitalization in japanese electric utilities this paper presents empirical evidence on scale economies and overcapitalization in japanese electric utilities we employ the short run equilibrium model in which the variable cost function treats capital stock as a quasi fixed factor we specify the variable cost function as a translog form and estimate it using panel data of nine japanese electric utility firms during the period 1981 to 1985 our results show that eight of the nine firms experience scale economies in the short run but diseconomies in the long run and that seven firms significantly over capitalize as expected by the averch johnson effect

oil prices inflation and interest rates in a structural cointegrated var model for the g 7 countries sharp increases in the price of oil are generally seen as a major contributor to business cycle asymmetries moreover the very recent highs registered in the world oil market are causing concern about possible slowdowns in the economic performance of the most developed countries in this paper a structural cointegrated var model has been considered for the g 7 countries in order to study the direct effects of oil price shocks on output and prices and the reaction of monetary variables to external shocks our results can be summarized as follows i a stationary money demand as suggested by the classic theory of money can be identified for most countries ii according to the estimated coefficients of the structural part of the model for all countries except japan and u k the null hypothesis of an influence of oil prices on the inflation rate cannot be rejected inflation rate shocks are transmitted to the real economy by increasing interest rates iii impulse response analysis suggests for most countries the existence of an instantaneous temporary effect of oil price innovations on prices iv impulse response functions indicate different monetary policy reactions to inflationary and growth shocks v the simulation exercises directed to estimate the total impact of the 1990 oil price shock indicate that for some countries u s a significant part of the effects of the oil price shock is due to the monetary policy reaction function for other countries canada france and italy however the total impact is offset at least in part by an easing of monetary conditions

compositional change aggregation and dynamic factor demand estimates on a panel of manufacturing firms most empirical research on investment and dynamic factor demand has used aggregated data the large number of authors who have cited this as a source of problems strongly suggests possible benefits from analyzing individual firm data this paper presents an analysis of a panel dataset of us manufacturing firms several models based on cost minimization and a three factor cobb douglas technology are developed the differences concern whether the technology varies across two digit sic industries the presence of fixed adjustment lags and the determinants of adjustment costs identification relies on the rational expectations hypothesis and estimation on non linear 3sls the estimates indicate that versions with the adjustment lag perform better than others conditional elasticities reveal that factor demand responds rapidly to anticipated changes in output and factor prices a finding consistent with other recent work it appears that the factor demand of large firms is more price sensitive and less sensitive to output than small firms consistent with recent work on credit market imperfections comparison of the results based on the pooled and the industry varying technologies indicate that the use of aggregate data is indeed a source of problems

assessing energy price induced improvements in efficiency of capital in oecd manufacturing industries to assess how capital stocks adapt to energy price changes it is necessary to account for the impacts on different vintages of capital and to account separately for price induced and autonomous improvements in the energy efficiency of capital stock the results of econometric analysis for five manufacturing industries in 19 oecd countries between 1990 and 2005 indicate that higher energy prices resulted in smaller energy use due to both improved energy efficiency of capital stock and reduced demand for the energy input the investment response to energy prices varied considerably across manufacturing industries being more significant in energy intensive sectors the results of policy simulations indicate that a carbon tax can deliver significant reductions in energy consumption in the medium run with modest declines in energy using capital stock

public investment and industry incentives in life science research life science research has shifted rapidly from the public to the private sector raising questions about government s remaining role we shed light on the issue by employing a dynamic investment response model to examine the public s impact on industry life science research effort and success we find that government expenditures in both basic biological research and agricultural and medical science create substantial spillovers for private firms the spillovers are unfortunately partly nullified by government competition for scarce research inputs yet even after accounting for such competition public investment has been strongly complementary to private investment indeed opportunities created through public research are the principal source of growth in industry life sciences copyright 2007 oxford university press

an examination of the equilibrium specification and structure of production for canadian telecommunications multiple output models of canadian telecommunications production are estimated under different production equilibria a specification test is conducted between the short and long run equilibrium models and the long run equilibrium is rejected in order to capture the nature of the disequilibrium a dynamic cost of adjustment model is estimated for bell canada there are significant adjustment costs and it is estimated that for 1 00 of marginal capital costs the carrier must incur an additional cost of 0 30 to install the new capital into the production process

cyclical factor utilization abstract we introduce procyclical labor and capital utilization as well as costs of rapidly increasing employment into a business cycle model plausible variations in factor utilization enable us to explain observed variability of real gnp with considerably smaller economy wide disturbances the costs of adjustment create very interesting and realistic lead and lag relationships employment does not peak until a full quarter after output workweeks effort capital utilization and productivity all sharply lead the business cycle

a dynamic analysis of interfuel substitution in u s industrial energy demand using data for 1960 92 to analyze interfuel substitution in the u s industrial sector a dynamic linear logit model is shown to provide superior global properties than a comparable dynamic translog model confirming earlier static results by t j considine 1989 the linear logit model provides a direct unbiased estimate of the rate of dynamic adjustment indicating a median response lag of less than two years excluding fuels used for nonenergy purposes yields larger estimates of the price elasticities for coal and oil and indicates generally greater potential for interfuel substitution than when using aggregate data

on the dynamic effects of oil price shocks a study using industry level data abstract this paper analyzes the effects of oil price shocks on demand and supply in various industries the impulse responses of identified var models indicate that for industries that have a large cost share of oil such as petroleum refinery and industrial chemicals oil price shocks mainly reduce supply in contrast for many other industries with the automobile industry being a particularly important example oil price shocks mainly reduce demand the paper suggests that oil price shocks influence economic activities beyond that explained by direct input cost effects possibly by delaying purchasing decisions of durable goods

determination of employment with wage and price speculation the purpose of this paper is to investigate whether aggregate fluctuations in employment may be explained within a market clearing framework as intertemporal substitution in labor supply and demand an intertemporal substitution model for the firm is derived this model is estimated with a lucas rapping type supply equation empirical results with finnish data lend support to the intertemporal substitution model particularly concerning the demand function specification on the other hand the results for the supply equation are somewhat mixed being rather sensitive to the dynamic specification

the general equilibrium costs and impacts of oil price shocks in newfoundland and labrador abstract the 2014 2015 dramatic drop in world oil prices had devastating impacts on a global scale we analyse economic costs and impacts of a negative oil price shock following the 2014 2015 decrease in oil prices on the provincial economy of newfoundland and labrador canada we use a dynamic computable general equilibrium model to estimate a drop in oil prices by inputting the estimated effect as a direct impact to royalties which are the land input in the oil and gas sector of the provincial economy we provide sensitivity to account for the duration and magnitude of the shock as well as the timing of recovery our results suggest that a shock in the price of oil will have its most significant impact on gdp in the initial years over the first five years the reduction in gdp due to this shock would be roughly 2 1 of gdp in our most realistic shock scenario but could be much higher in other scenarios considered a sharp drop in gdp over the first five years will be mitigated somewhat in the long run as the growth in oil prices rises however negative long run impacts to gdp persist due to the oil price shock in 2014 2015 and will worsen if there is a prolonged shock

the intertemporal dimension of neoclassical production theory abstract the aim of this survey paper is to provide a guide to the literature on optimal dynamic factor demands to the non specialist reader interested in applied work we start with the distinction between variable and quasi fixed factors of production and use these to characterize the firm s temporary equilibrium we then review the optimal intertemporal behaviour of the firm using the notion of adjustment costs as a means to solve the firm s optimization problem this process gives rise to a system of interrelated dynamic factor demands in a flexible accelerator format theoretical difficulties and empirical limitations of this model are discussed this fact leads us to review the theory of intertemporal duality we next analyze the issue of expectations in this class of dynamic models a section reviewing the empirical work on dynamic factor demands follows after which we offer some concluding remarks

quasi fixed inputs in u s and japanese manufacturing a generalized leontief restricted cost function approach in this paper a generalized leontief variable cost function is develope d which permits analytical derivation of steady state levels of quasi fixed inputs and capacity output and does not require specification of a numeraire input this framework is then used to evaluate the fa ctor demand patterns of japanese and u s manufacturing based on bot h one quasi fixed capital input and two quasi fixed capital and la bor input specifications and both static and dynamic optimization t he findings provide evidence of considerable flexibility of demand re sponses in japan which may have contributed to japan s relatively st rong economic performance in the volatile 1970s copyright 1988 by mit press

dynamic factor demand equations in u s and canadian agriculture abstract this research provides one of the first empirical estimates of a data based dynamic factor demand model for american and canadian agriculture models such as these deserve more widespread use in the empirical analysis of agriculture these models have the advantage that they do not impose inappropriate dynamics on the data rather they permit the data to select the appropriate dynamics we use a model originally developed by anderson and blundell this model is a general first order dynamic model which contains as testable hypothesis several simpler models this model permits us to estimate the long run agricultural production structure as a subset of the dynamic parameter estimates we will test this long run structure for symmetry homotheticity and neutral technical change the estimated models may be used to test for three alternative dynamic structures in the limit dynamics may not be needed and we can test for the static long run equilibrium model two intermediate cases are the autoregressive and the partial adjustment models which are simpler than the general model but still include dynamics our results suggest that the long run equilibrium model is unsatisfactory in both countries a dynamic model is needed in both countries the two more restricted dynamic models are rejected the general dynamic model is required in canada the long run equilibrium structure is homothetic with neutral technical change in the united states homotheticity is also accepted but neutral technical change is rejected

productivity growth in u s agriculture under dynamic adjustment a dynamic measure of productivity growth adjusted for deviations from the long run equilibrium is established within an adjustment cost framework an empirical application to u s agriculture is presented which permits identifying the dynamic linkages between technical change and productivity growth in u s agriculture total factor productivity as dynamically measured grew at 1 50 per annum the combined effect of scale quality adjusted input growth and long run disequilibrium input use contributes only 3 44 of the growth while technical change dominates the growth of total factor productivity

rebound directed technological change and aggregate demand for energy abstract we analyse the long run role of energy in aggregate production the factor share of energy has been remarkably constant despite the relative decline in the price of energy we analyse possible explanations for this observation ruling out the idea that endogenous directed technological change has led to a failure of energy augmenting technology to keep pace with labour augmenting technology instead we propose a model in which a combination of income and substitution effects has driven both shifts in consumption patterns towards existing energy intensive goods and the emergence of new such goods

recursive factor of production interrelations and endogenous cycling a multivariate linear rational expectations equilibrium version of the lucas prescott investment model is developed to study the behavior of factors of productions with recursive interrelations the connection between these interrelations and endogenous cycling is established in a testable way maximum likelihood estimates using annual postwar aggregate u s manufacturing data provide strong evidence of capital labor interrelations that induce a labor overshooting type of endogenous cycling this raises questions for the methodology of current real business cycle models which rule out the possibility of such interrelations copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

expectations and factor demand this paper develops and estimates a model of interrelated factor demand with rational expectations in the presence of internal adjustment costs invariant technological parameters are distinguished from the firm s adjustment parameters which change when the exogenous processes faced by the firm change the capital demand equation is derived by solving the euler equations which stem from minimization of the present value of costs future exogenous variables are supplied from solutions of arima equations the model is tested on postwar quarterly data for u s manufacturing a regime change in the process for energy prices is simulated as is a temporary suspension of the investment tax credit

real flexibility and financial structure an empirical analysis i examine the empirical relation between real flexibility and financial structure i test whether real flexibility increases debt capacity by lowering default risk and making assets more marketable or decreases debt capacity by facilitating risk shifting and asset substitution i measure real flexibility as the sensitivity of marginal production and investment decisions to variations in the economic environment i find that financial leverage is negatively related to production flexibility but positively related to investment flexibility this split in results suggests that although asset substitution facilitated by investment flexibility can be prevented contractually risk shifting facilitated by production flexibility is intractable copyright 2003 oxford university press

factor substitution in u s manufacturing does plant size matter we use micro data for 10 412 u s manufacturing plants to estimate the degrees of factor substitution by industry and by plant size we find that 1 capital labor energy and materials are substitutes in production and 2 the degrees of substitution among inputs are quite similar across plant sizes in a majority of industries two important implications of these findings are that 1 small plants are typically as flexible as large plants in factor substitution consequently economic policies such energy conservation policies that result in rising energy prices would not cause negative effects on either large or small u s manufacturing plants and 2 since energy and capital are found to be substitutes the 1973 energy crisis is unlikely to be a significant factor contributing to the post 1973 productivity slowdown

r d production structure and rates of return in the u s japanese and german manufacturing sectors a non separable dynamic factor demand model abstract the focus of this paper is an analysis of the production structure the demand for factor inputs and the rates of return in the manufacturing sector of three major industrialized countries the united states japan and germany the analysis is based on a dynamic factor demand model with two variable inputs labor and materials and two quasi fixed inputs capital and rd also for all countries the speed of adjustment for capital is found to be higher than that for r d

corporation tax asymmetries and investment evidence from uk panel data theoretical work has emphasised the potentially powerful impact of corporation tax asymmetries on investment behaviour but empirical work has mainly been confined to the measurement of effective tax rates this paper uses panel data from 597 u k companies to ask are tax asymmetries important to understanding observed investment behaviour an optimising investment model is developed and estimated both as a q equation and a euler equation in which the cost of capital appears careful modelling of asymmetries does not noticeably improve the empirical performance of these equations possible explanations are discussed

quantifying uk capital adjustment costs this paper estimates uk capital adjustment costs using manufacturing and service industry data for 19702000 there is evidence of significant adjustment costs with a 1 increase in investment reducing value added by 0 05 this implies an elasticity of investment with respect to tobin s q of 2 5 and a convergence time for capital of 12 years the results suggest that adjustment costs may have caused half of the slowdown in uk total factor productivity tfp growth during the second half of the 1990s the impact is larger than that reported for the united states reflecting larger adjustment costs and higher investment growth

interrelated factor demands from dynamic cost functions an application to the non energy business sector of the uk economy in this paper we propose a dynamic cost function which allows us consistently to derive a set of dynamic interrelated factor demand equations in the general error correction form introduced by anderson and blundell 1982 this paper expands results recently published in urga 1996 it shows that the derivation of an effective underlying cost function allows us to identify the full set of parameters of the underlying process this does not happen in the standard anderson blundell formulation we report an empirical exercise used to model the so called supply side of the london busines school large scale economic model where we estimate both the set of factor demands and the underlying dynamic cost function for the non energy business sector of the uk economy

the effects of uncertainty and adjustment costs on investment in the almond industry a neoclassical model of investment behavior is developed wherein firms are assumed to maximize the expected present value of net revenue under leontief technology prices and yields are assumed to be stochastic this framework yields investment as a function of the expected present value of the output from one unit of capital and the variance of the expected value this theory is applied to investment in the almond industry the model outperforms both a model without uncertainty and one with neither uncertainty nor adjustment costs using in sample and out of sample tests copyright 1989 by mit press

energy price energy efficiency and capital productivity empirical investigations and policy implications abstract the immediate effect of carbon pricing policy is to raise energy costs which in turn reduces energy consumption either through induced capital under utilization or investments in new energy efficient capital the latter mechanism which implies improvements in energy efficiency is realized in the long run while the former which has implications for capital productivity tends to occur in the short run we employ panel vector autoregressions as well as co integration and error correction techniques to identify these short and long run relationships including their differences across canadian industries

dynamic factor demand systems and the adjustment speed towards equilibrium most models of factor demand can be grouped into two categories the first is static models which consistently account for substitution among several factors without imposing a priori restrictions on the production structure such models utilize flexible functional forms to represent the underlying technology however they impose strict restrictions on the dynamic behaviour of the technology in that either full or partial static equilibrium is assumed studies in this group providing a rationale for modelling some input factors as fixed in the short run include brown and christensen 1980 and kulatilaka 1985 a partly dynamic approach was suggested by pindyck and rotemberg 1983 who explicitly model the adjustment costs of some factors however the underlying production technology is still regarded as static the second category consists of dynamic models that incorporate cost of capital stock adjustments such models often apply a single factor and typically impose ad hoc assumptions in both categories the researcher selects the inputs which are not regarded as completely variable mostly on the basis of a priori assumptions in this paper we will focus on implications of a dynamic modelling of factor demand systems it is clear that a firm will adjust to price changes only when it is profitable to do so accordingly the cost of adjustment may serve as a rationale for why different factors may adjust towards equilibrium at different speeds hence when we are able to model the adjustment speed of the different factors we are also able to parametrically test for the

inventories as factors of production and economic fluctuations this paper presents a theory of inventory investment by stage of processing and uses it to examine the role of inventory investment in economic fluctuations the model in which inventories are treated as factors of production is estimated for four durable goods industries three conclusions emerge from the estimation first the estimates generally satisfy the theoretical restrictions second the elasticity of inventory demand with respect to output is high indicating an important accelerator effect finally the estimates suggest that shifts in the demand for inventories are an important source of economic fluctuations copyright 1989 by american economic association

short and long term equilibria relationships between first and third generation dynamic factor demand models abstract first generation dynamic models of input demands are theoretically inferior to third generation models yet their simplicity makes them attractive for estimation purposes moreover first generation models can be shown to be generically related to third generation models and under certain assumptions input demand expressions in a third generation model collapse to those of the first generation seemingly offering a short cut for estimation however empirical comparisons suggest that first generation specifications do not afford a reasonable approximation to input functions embedded in more complex third generation models furthermore the reduced form coefficients do not permit identification of third generation model structures

liberalisation consumption heterogeneity and the dynamics of energy prices in this study the methodology var and the cointegration analysis are used to examine the dynamic interaction among the energy prices of the competitor energy sources in a liberalised market data from the uk market were applied and models for the residential and industrial sectors were developed our results indicate the existence of long run relationships between the energy prices before and after the liberalisation implying the possibility of substitution among the different forms of energy however the results appear to be also largely influenced by external variables not included in the models that may be reducing the importance of the energy prices over their own evolution and offsetting the basic substitution relationships the general results of the impulse response functions both for the residential and industrial sectors present low statistical significance which seems to be due to the still slow rate of adjustment of the energy market to price changes along with the immaturity of the liberalisation process taking into consideration the results some routes for future research are pointed out namely the need to include in the analysis variables which would proxy the general state of the economy

the mis specification of production costs in production smoothing models estimation results obtained with production smoothing models are often imprecise and sensitive to normalisation rules it is argued here that production costs in these models can be better specified in terms of production factor costs the resulting factor demand model with inventories leads to more efficient estimation results and normalisation rules become even redundant furthermore the smoothing role of inventories with respect to production factors is discussed c 1997 elsevier science s a

structural models of dynamic factor demands with nonstatic expectations an empirical assessment of alternative expectations specifications until recently little literature existed on incorporation of nonstatic price and output expectations into empirically implementable factor demand models for example the vast literature on flexible functional forms is almost completely characterized by static expectations on prices and output as well as instantaneous adjustment to desired levels of demand more recent studies have incorporated increasingly complex theoretical and econometric structures the literature along the lines of fuss 1976 and berndt fuss and waverman 1979 bfw incorporates endogenous determination of dynamic adjustment structure but retains a static expectations assumption on the other hand most current rational expectations models following the lead of thomas sargent and robert lucas make very restrictive simplifying assumptions on the deterministic economic structure in order rigorously to specify the complex stochastic structure implied by the rational expectations assumption a thrid category of model represented by pindyck and rotemberg 1983 relies on an instrumental variable approach to ensure error orthogonality and hence consistency with the rational expectations assumption this procedure allows for a more complete structural specification but does not explicitly incorporate an expectations process this paper represents a step toward a synthesis of the structural and stochastic approaches to dynamic input demand modeling with emphasis on both theoretical foundations and empirical tractability in this approach approximations to rational expectations and certainty equivalence are used explicitly to incorporate anticipatory behavior of firms into the structural model of dynamic factor demands theoretically this is accomplished without sacrificing rich economic structure a structural factor demand model is developed which includes both stock relationships and expectations formation based on an explicit dynamic optimization framework empirically the focus is on avoiding complex stochastic structures that are of little use to most empirical researchers all of the expectational models are empirically straightforward to implement and yet incorporate the important theoretical and empirical structure required for detailed analysis of short and long run behavior two issues must be addressed to formalize and implement the model the

the cyclical nature of markups in canadian manufacturing a production theory approach in this paper the effects of cost and demand characteristics on the magnitude and cyclical behaviour of markups in canadian manufacturing are measured within a production theory framework price to marginal cost ratios for various manufacturing industries are computed and the impact art their secular and cyclical trends from changes in capacity utilization scale economies variable input prices import competition unemployment and other exogenous market and technological determinants are explored using adjusted markup indexes and elasticities the measured price margins seem weakly procyclical further evaluation of the determinants of these cycles suggests that the procyclical nature of markups is primarily related to exogenous factors affecting costs such as energy price shocks and that cost characteristics underlying scale economies provide a countercyclical influence that counteracts the profitability arising from markups

the own wage elasticity of labor demand a meta regression analysis firms labor demand responses to wage changes are of key interest in empirical research and policy analysis however despite extensive research estimates of labor demand elasticities remain subject to considerable heterogeneity in this paper we conduct a comprehensive meta regression analysis to re assess the empirical literature on labor demand elasticities building on 942 elasticity estimates from 105 different studies we identify sources of variation in the absolute value of this elasticity heterogeneity due to the theoretical and empirical specification of the labor demand model different datasets used or sectors and countries considered explains more than 80 of the variation in the estimates we further find substantial evidence for the presence of publication selection bias as estimates of the own wage elasticity of labor demand are upwardly inflated

cost specification and firm behaviour in a hotelling model of resource extraction in applied resource economics much attention has been focused on the ability of the hotelling model to explain observed firm behavior in this paper a preliminary specification search is performed to determine the appropriate cost function parameterization for the firms in the sample before proceeding to the estimation of the euler equation once a cost function specification is chosen the corresponding euler equation is estimated via the generalization method of moments gmm which allows for better estimates of the euler equations than in previous studies even with the preliminary specification search and the use of gmm estimation the behavior of the panel of fourteen canadian copper mining firms in the data set examined does not seem to be consistent with the basic hotelling model used

an econometric analysis of fluctuations in aggregate labor supply and demand the paper contains a simple equilibrium model of the labor market the supply function allows for intertemporal substitution in response to real wage fluctuations and the demand function allows for adjustment costs on employment the supply and demand functions both solve quadratic partial adjustment problems driven by rational expectations about future real wages the market equilibrium also solves a partial adjustment problem driven by rational expectations about future preference and technology shocks two related issues are emphasized the identification of dynamic labor supply and demand functions and the theoretical interpretation of serial correlation in employment and real wages when the supply and demand shocks are assumed to be ar 1 processes which are not causally related the model delivers a simple structure for the equilibrium process for employment and real wages which is a restricted var 2 this simple structure facilitates the interpretation of summary statistics on the time series properties of observed employment and real wage series the supply and demand functions can both be locally identified using only employment and real wage data an illustrative application is presented using u s manufacturing data for the period 1948 1971

returns to scale in the long run the dynamic theory of cost the concept of scale economies is muddled by the problem specific nature of determining the length of run the distinction between the short and long run becomes a prime consideration in determining the appropriate time scale of economic decision making strategies these strategies center on the choice of factors of production that are assumed to be fixed when factor allocation decisions are to be made

carbon leakage revisited unilateral climate policy with directed technical change using a stylized theoretical model we argue that current economic analyses of climate policy tend to over estimate the degree of carbon leakage as they abstract from the effects of induced technological change we analyse carbon leakage in a two country model with directed technical change where only one of the countries enforces an exogenous cap on emissions climate policy induces changes in relative prices that cause carbon leakage through a terms of trade effect however these changes in relative prices also affect the incentives to innovate in different sectors this leads to a counterbalancing induced technology effect which always reduces carbon leakage we therefore conclude that the leakage rates reported in the literature may be too high as these estimates neglect the effect of price changes on the incentives to innovate

an adjustment cost model of long term employment in japan summary a dynamic factor demand model is presented which pays special attention to the prevalence of a longterm employment relationship in japan the model is based on the representation of technology by a variable cost function with adjustment costs for employment and capital stock where the variable cost consists of the sum of overtime costs and materials costs with employment being quasi fixed and scheduled hours institutionally regulated short run adjustments are mostly made by overtime hours application to a time series data on the japanese electrical machinery industry indicates quasi fixity of capital and employment and reproduces short run overshooting of overtime hours to compensate for the sluggish adjustment of employment

capacity utilization and depreciation in use in this paper the effect capacity utilization has on the depreciation of capital goods is studied starting from a quadratic approximation to a normalized short run cost function expressions for the optimal rate of capacity utilization the demands for labour and energy and for investment are obtained investment is a function of past capital stock expected future capital stock expected future relative prices and expected future depreciation rates expectations are modelled via instruments the model is tested using us total manufacturing quarterly data depreciation dependent upon usage is found to be both statistically and economically significant

economic fluctuations market power and returns to scale evidence from firm level data recent research on aggregate fluctuations coupled with ongoing work in industrial organization has renewed interest in the existence magnitude and cyclical pattern of market power and the extent of increasing returns to scale by exploiting restrictions from dynamic theory and information from financial markets we present a framework for generating quantitative evidence on market power and returns to scale tailoring the econometric model to firm level panel data we calculate the percentage differential between price and marginal cost the lerner index in terms of the parameters from the econometric system results for firms in eleven industries indicate that there is a great deal of heterogeneity in the extent of market power industries with significantly positive lerner indices tend to have substantial increasing returns in the production technology we find that there is only a modest relation between our estimated lerner indices and traditional measures of market power and that when market power varies temporally it is usually procyclical thus variations in the markup of price over marginal cost may help dampen aggregate economic fluctuations

inventories employment and hours abstract this paper develops a model that integrates inventory and labor decisions we extend a model of inventory behavior to include a detailed specification of the role of labor input in the production process distinguishing between employment hours and effort per worker we estimate jointly the euler equations for inventories and employment a labor compensation schedule and an hours requirement function with the cross equation restrictions imposed the econometric results shed light on several important topics including the shape of the marginal cost of output the role of labor hoarding as an explanation of pro cyclical productivity and the persistence of inventory stocks

dynamic factor demands and the effects of energy price shocks a dynamic model is used to understand how sharp changes in energy prices affect investment behavior employment and energy use the authors discuss the theory behind their model selection model specifications estimation methods and data list parameter estimates and elasticities for the selected model and describe the simulations they conclude that 1 the data strongly reject the hypothesis of constant returns to scale within their specification of aggregate production 2 the data indicate adjustment costs on labor are small and 3 their results help reconcile some of the conflicting estimates of energy demand elasticities appearing in recent literature 23 references 3 figures 3 tables

technical efficiency and u s manufacturing productivity growth this paper establishes that new inputs increase technical efficiency levels for u s manufacturing over the period 1950 1998 intermediate inputs exhibited higher rates of efficiency growth than labor and capital efficiency adjusted productivity growth annually averaged 0 4 percentage points above measured growth the gap between efficiency adjusted and measured productivity growth arises from aggregating inputs using observed and not efficiency adjusted cost share weights in the calculation of measured growth specifically the decline in efficiency adjusted material cost shares compared to the measured shares coupled with the comparatively high material input growth rate was the main source of the productivity gap

asymmetric adjustment of dynamic factors at the firm level presents a study which addressed the deficiencies of previous studies the specification and estimation in the modeling of asymmetry and zero gross investment in the agricultural industry reference to previous studies on asymmetry information on the standard dual model results of the study

dynamic factor demands and market structure under rational expectations some estimates for the italian manufacturing system this paper deals with a dynamic model of the behaviour of firms under rational expectations the adjustment cost framework is followed to describe production technologies the objective of firms is to maximize the stream of future profits under rational expectation first order conditions for the optimum are derived with respect to input demands and one output supply the output market structure is modelled in order to test price taking behaviour the adjustment costs of quasi fixed inputs are internal and interrelated the model is estimated for the italian manufacturing system with encouraging results

red white and pink linking public good contributions to private good sales abstract this paper explores a common form of corporate social responsibility practiced by firms where firms link the sales of private goods to charitable contributions we build a model to explore the profitability of a market for such linked goods when the purchase of the private good allows the consumer to exhibit her altruism while direct contributions towards the public good do not we also study the effect of linked goods on total contributions towards the public good and explore the role of advertising and publicity in this market

labor demand effects of rising electricity prices evidence for germany abstract germany continues to play a pioneering role in replacing conventional power plants with renewable energy sources while this might be beneficial with respect to environmental quality it also implies increasing electricity prices the extent to which this is associated with negative impacts on employment depends on the interrelationship between labor and electricity as input factors in the production process in this paper we estimate cross price elasticities between electricity and heterogeneous labor for the german manufacturing sector we use administrative linked employer employee micro data combined with information on sector level electricity prices and usage over the period 2003 2007 we find positive but small conditional cross price elasticities of labor demand with respect to electricity prices which means that electricity as an input factor can be replaced by labor to a limited extent when the production level is held constant in the case of adjustable output we find negative unconditional cross price elasticities implying that higher electricity prices lead to output reductions and to lower labor demand with low and high skilled workers being affected more than medium skilled resulting adverse distributional effects and potential overall job losses may pose challenges for policy makers in securing public support for the german energy turnaround

price margins and capital adjustment canadian mill products and pulp and paper industries abstract the purpose of this paper is to estimate a model incorporating non competitive behaviour in product and factor markets in addition capital accumulation is subject to adjustment costs so that firms are not constrained to be in long run equilibrium the model is applied to two major canadian manufacturing industries pulp and paper and mill products the results show for both industries in each of three product markets and the wood input market that there is competitive behaviour in addition the industries are not in long run equilibrium as marginal adjustment costs cause marginal profit to exceed the rental rate on capital with the industries exhibiting short run competitive behaviour in product and factor markets new estimates are derived for scale economies and rates of technological change unlike the results from other studies both industries exhibit small scale economies and positive rates of technological change

comparison of alternative utility functions in portfolio selection problems this paper examines the effect of alternative utility functions and parameter values on the optimal composition of a risky investment portfolio normally distributed assets are the setting for the theoretical and empirical analyses the results agree well with the available theory and imply utility functions and parameter values that are appropriate for investors with particular risk bearing attitudes the results give strong empirical support to the proposition that utility functions having different functional forms and parameter values but similar absolute risk aversion indices have similar optimal portfolios these results suggest that over horizons up to one year one can safely substitute convenient surrogate utility functions for other utility functions for reasons of tractability or otherwise the results also provide guidance regarding the significance of the magnitude and change of particular numerical values of the risk aversion index moreover theoretical exact results are obtained using rubinstein s measure of global risk aversion

dynamic factor demands under rational expectations we model the industrial demands for structures equipment and blue and white collar labor in a manner consistent with rational expectations and stochastic dynamic optimization in the presence of adjustment costs but allowing generality of functional form we represent the technology by a translog input requirement function that specifies the amount of blue collar labor needed to produce an output level given quantities of three quasi fixed factors nonproduction workers equipment and structures a complete description of the production structure is obtained by simultaneously estimating the input requirement function and three stochastic euler equations we find adjustment costs are small in total but large on the margin and differ considerably across factors

consistent tariffs with dynamic supply response abstract this paper models a large importer of a competitively produced good for which there are nonlinear adjustment costs in production if producers have rational expectations and the importer is unable to make a credible commitment regarding future tariffs market power may be disadvantageous this is more likely to occur when the difference between short and long run elasticities of supply are large this result depends on the particular subgame perfect equilibrium that is chosen if producers were capable of strategic behavior other equilibria which rely on trigger strategies would be reasonable and market power could no longer be disadvantageous

estimating dynamic dual models under nonstatic expectations in this paper we derive a system of equations depicting agents dynamic decision rules under nonstatic price expectations based on the adjustment cost model of the firm the integrability conditions which can serve to guide the specification of flexible functional forms are established a two stage econometric model permitting empirical examination of both the expectations formation process and the dynamic structure of the industry is estimated using two different data series for u s production agriculture the estimation results suggest evidence of the presence of nonstatic price expectations in dynamic dual models for u s production agriculture

assessing a disaggregated energy input using confidence intervals around translog elasticity estimates the role of energy in the production of manufacturing output has been debated extensively in the literature particularly its relationship with capital and labor in an attempt to provide some clarification in this debate a two step methodology was used first under the assumption of a five factor production function specification we distinguished between electric and non electric energy and assessed each component s relationship with capital and labor second we calculated both the allen and price elasticities and constructed 95 confidence intervals around these values our approach led to the following conclusions that the disaggregation of the energy input into electric and non electric energy is justified that capital and electric energy and capital and non electric energy are substitutes while labor and electric energy and labor and non electric energy are complements in production and that capital and energy are substitutes while labor and energy are complements

tax policy and business fixed investment in the united states abstract this paper derives and estimates models of nonresidential investment behavior in which current and future tax conditions directly affect the incentive to invest the estimates suggest that taxes have played an independent role in affecting postwar u s investment behavior particularly for investment in machinery and equipment in addition the paper develops a method for assessing the impact of tax policy on the volatility of investment when such policy is endogenous illustrative calculations using this technique based on the paper s empirical estimates suggest that tax policy has not served to stabilize investment in equipment or nonresidential structures during the sample period

monetary policy response to oil price shocks how should monetary authorities react to an oil price shock this paper shows that in a noncompetitive economy policies that perfectly stabilize prices entail large welfare costs hence explaining the reluctance of policymakers to enforce them the policy trade off is nontrivial because oil energy is an input to both production and consumption as welfare maximizing policies are hard to implement and communicate i derive a simple interest rate rule that depends only on observables but mimics the optimal plan in all dimensions the optimal rule is hard on core inflation but accommodates oil price changes

energy transition under irreversibility a two sector approach in this paper we analyze the optimal energy transition of a two sector economy energy and final goods with exhaustible oil reserves a renewable source of energy and a pollution threat the latter corresponds to a pollution threshold above which a part of the capital is lost following flooding for instance we show that the optimal energy transition path may correspond to a corner regime in which the economy starts using both resources then crosses the pollution threshold and therefore loses a part of its capital at the end the sole adoption of the renewable energy is optimal only in the long run this result is in line with the asymptotic energy transition arguments stating that the transition to clean energy may happen only in the long run we also show that economy reduces the use of energy resource as long as the productivity of capital and energy services is high therefore public policies should promote investments in energy innovation that targets productive sector home appliances and buildings and helps to save both money and energy we extend the present model to allow for additional investment in energy saving technologies our main results show that this additional investment favours the energy transition in the sense that it increases the time within which the economy may experience the catastrophe and the welfare of the society for policy implications economic instruments such as taxes on dirty energy subsidies on clean energy or incentives for energy saving technologies need to be implemented in order to promote the energy transition this is particularly important for developing countries that mostly rely on polluting energy resources and are the most vulnerable to climate change but those economic instruments should be carefully designed in line with the asymptotic energy transition result

liability management of financial intermediaries in a dynamic and uncertain perspective this paper examines the effect of rate uncertainty first for the loan rate alone next for both asset and liability rates on the liability funding decisions of a risk neutral intermediary in this model a la pindyck rates evolve according to stochastic processes convex adjustment costs arise from the dichotomy of existing core deposits and new savings balances and the intermediary s cash flow is embedded into capital market theory then we show that the stationary equilibrium obtains at the intersection of the locus of no change in deposit holdings with the isocline of zero change in savings balances loan rate uncertainty alone shifts the savings isocline outward when marginal adjustment costs are rising at an increasing rate but when asset and liability rates are uncertain their impact on the mean intermediation spread core deposit holdings and adjustment costs depends on whether they are correlated or not

financial structure production and productivity evidence from the u s food manufacturing industry this study integrates production and financing to examine the impacts of financial structure change on the production profitability and productivity growth in the u s food manufacturing industry empirical results show that during the period covered by this study agency cost associated with increased debt use by this industry negatively affected its output growth input demand profitability and overall productivity growth dividend payment positively contributed to the production and performance of this industry via signaling benefit however the negative effects of increased debt use by this industry far outweighed the positive contribution of dividend payment the u s food industry achieved a 0 9 average annual productivity growth which came primarily from technological progress and capital adjustment the rapid increase in debt use by this industry was responsible for slowing down the pace of productivity growth via its negative contribution to the total factor productivity growth capital expansion was the principal driver of output growth and profitability in this industry

the employment and wage effects of oil price changes a sectoral analysis in this paper we use micro panel data to examine the effects of oil price changes on employment and real wages at the aggregate and industry levels we also measure differences in the employment and wage responses for workers differentiated on the basis of skill level we find that oil price increases result in a substantial decline in real wages for all workers but raise the relative wage of skilled workers the use of panel data econometric techniques to control for unobserved heterogeneity is essential to uncover this result which is completely hidden in ols estimates while the short run effect of an oil price increase on aggregate employment is negative the long run effect is in fact positive we find that changes in oil prices induce changes in employment shares and relative wages across industries however we find little evidence that oil price changes cause labor to consistently flow into those sectors with relative wage increases copyright 1996 by mit press

spillovers from publicly financed r d capital in high tech industries abstract this paper employs a dynamic production model to examine the short run effects of publicly financed r d capital on the cost structure of six high tech us manufacturing industries the results show that given an industry s output publicly financed r d capital reduces the variable production cost in all industries in addition an increase in publicly financed r d causes output to increase implying that producers as well consumers are better off despite the presence of strong monopoly power in some industries a low bound for the social rate of return to publicly financed r d is also calculated

interrelated factor demands for manufacturing a dynamic translog cost function approach abstract in this paper we report the results of estimating a joint model for labour capital and energy using the transcendental logarithmic cost function of christensen jorgenson and lau 1973 this allows us to determine both the own price and cross elasticities of substitution between labour capital and energy we combine a model of factor shares with a dynamic adjustment process for each factor we also impose on the cross equation restrictions necessary to provide additivity homogeneity and symmetry since the covariance matrix in systems of share relationships is singular we follow the suggestions of anderson and blundell 1982 and employ a mullivariate error corrrection model the results suggest that additivity symmetry and homogeneity restrictions do hold and that there are short run increasing returns to scale

how do banks adjust to changing input prices a dynamic analysis of u s commercial banks before and after the crisis abstract the 2000 2013 period was characterized by substantial regulatory monetary and technological change especially after the onset of the global financial crisis this study assesses the total impact of these policy shifts and technological changes on u s commercial banks short run and long run substitution elasticities an endogenous break test divides the sample into a pre crisis period and a post crisis period during the former period banks inputs tend to be inelastic substitutes after the onset of the crisis particularly the long run substitutability of most input factors decreases to even lower levels due to changes in both cost technology and economic conditions at the same time banks response to input price changes becomes more sluggish hence especially after the onset of the crisis banks have little flexibility regarding input factor usage and are thus sensitive to input price changes from a cost perspective

technological choices and regulation the case of the canadian manufacturing sectors the economic environment in which canadian manufacturing firms operate has changed substantially over the last 40 years technological changes new regulations deregulation and exogenous economic shocks all have been important aspects of this economic environment in this article we show how to include such changes in the economic environment faced by the firms in a behavioural model that includes the investment decision of the firm under uncertainty assumptions regarding the expectation formation process and technology are kept minimal we estimate the effects of innovations such as the free trade agreement the foreign investment review agency and the federal environmental policy on the economic decisions of fifteen canadian manufacturing sectors jel classification d24 choix de technologies et reglementation le cas des secteurs manufacturiers canadiens au cours des 40 dernieres annees l environnement economique des firmes manufacturieres canadiennes s est grandement transforme que ce soit a cause du changement technologique de la reglementation de vagues de dereglementation ou de chocs economiques exogenes les firmes ont du s adapter en modifiant leur technologie dans cet article nous montrons comment prendre en compte les changements de l environnement economique des firmes dans le cadre d un modele decisionnel de la firme en incertitude avec investissement les hypotheses concernant la technologie et les anticipations sont aussi generales que possible nous estimons l effet qu ont eu l accord de libre echange l agence de tamisage des investissements etrangers et la politique environnementale federale sur les choix de technologies des firmes de quinze secteurs manufacturiers canadiens

productive and financial performance in u s manufacturing industries an integrated structural approach in the last few years macroeconomists and industrial organization researchers have reexamined relationships among scale economies markups economic profitability and productivity growth paul romer 14 has emphasized the importance of increasing returns for productivity growth at the aggregate industry or economy level empirical evidence supporting this at the industry level has been presented by robert hall 4 5 who reported both significant increasing returns and markups of price over marginal cost in various u s manufacturing sectors related evidence on the cyclical nature of markups in these industries suggesting some procyclicality of markup behavior has been presented by domowitz hubbard and petersen 3 analysis of the cyclical characteristics of robert solow s 16 productivity residual provided the basis for these empirical studies the resulting framework is limited however by its dependence on a number of restrictive assumptions which severely hamper analysis of interactions among these characteristics the purpose of this paper is to extend this type of analysis to consider profit maximizing markups economic profitability scale economies capacity utilization and productivity growth within an integrated theoretical structural model and to assess their interactions empirically for two digit u s manufacturing data more specifically using the new industrial economics approach outlined by timothy bresnahan 2 in which marginal cost and therefore markups are unobserved but estimated econometrically i specify an integrated cost and demand structure for each industry the structure is quite general in that i markups and returns to scale are permitted to vary over time they are not constant parameters ii shortand long run impacts are distinguished by explicit recognition of adjustment costs iii quasi fixity of both capital and labor is incorporated to accommodate labor hoarding as well as slow adjustment of capital iv input substitution is not constrained a priori a generalized leontief restricted cost function based on gross output is employed v nonstatic expectations are allowed for through an instrumental variable estimation procedure and vi the effects of cost and demand shocks are directly represented by specifying and estimating industry specific cost output demand and input demand functions