testing intertemporal budget constraints theory and applications to u s federal budget and current account deficits this paper extends previous tests of intertemporal budget balance and present value relationships by expanding the set of allowable deficit processes and by deriving a testable condition that is sufficient to ensure intertemporal budget balance as long as the expected discount rate is strictly positive using these tests the authors find that both the postwar federal budget deficit process and the process governing accumulation of u s assets by foreigners are consistent with intertemporal budget balance copyright 1991 by ohio state university press

the lechatelier principle the lechatelier principle in the form introduced into economics by paul a samuelson asserts that at a point of long run equilibrium the derivative of long run compensated demand with respect to own price is larger in magnitude than the derivative of short run compensated demand the authors introduce an extended lechatelier principle that applies also to large price changes and to uncompensated demand as well as to a wide range of concave and nonconcave maximization problems outside the scope of demand theory this extension also clarifies the intuitive basis of the principle copyright 1996 by american economic association

comparing optima do simplifying assumptions affect conclusions consider a family of maximization models in which the optimum trades off beneficial and costly effects then comparative statics derived under many kinds of simplifying assumptions about the benefits technology are also true for general convex and nonconvex technologies for example any comparative statics conclusion about investment by a risk averse decision maker under uncertainty that holds when expected returns are described by a general linear function also holds for an arbitrary nonlinear expected return function

the sustainability of government deficits implications of the present value borrowing constraint this paper introduces a new methodology for evaluating the sustainability of fiscal policy the new methodology is distinguished from most existing tests in two important respects first it allows for stochastic real interest rates and second it is both necessary and sufficient results from the application of the new test suggest that recent fiscal policy in the united states has not been sustainable the paper contrasts its findings with those of james d hamilton and marjorie a flavin 1986 copyright 1989 by ohio state university press

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

computing productivity firm level evidence we explore the effect of computerization on productivity and output growth using data from 527 large us firms over 1987 1994 we find that computerization makes a contribution to measured productivity and output growth in the short term using one year differences that is consistent with normal returns to computer investments however the productivity and output contributions associated with computerization are up to five times greater over long periods using five to seven year differences the results suggest that the observed contribution of computerization is accompanied by relatively large and time consuming investments in complementary inputs such as organizational capital that may be omitted in conventional calculations of productivity the large long run contribution of computers and their associated complements that we uncover may partially explain the subsequent investment surge in computers in the late 1990s

technological progress and optimal factor demand abstract this paper analyzes the employment and investment demands of the competitive firm when technological progress embodied in new investment goods is a source of productivity improvements it is shown that technological progress reduces the implicit cost of capital services as well as its sensitivity to variations in the price system several versions of lechatelier s principle are established showing how technological progress modifies the price sensitivity of the factor demands rapid technological progress makes the factor demands less sensitive to price variations however employment demand becomes less more sensitive to interest rate changes when capital and labor are complements substitutes

learning by doing and optimal factor demand abstract in this paper we consider the problem of the firm s optimal plans for factor usage under conditions of profit maximization two factors of capital and labor are considered in a dynamic choice system where labor is endowed with a capacity to learn on the job but capital is not by specifying the problem as an optimal control process two shadow prices of capital and labor services are derived we then advance a theory of investment demand and labor employment as a joint process the effects of learning by doing and labor turnover rate on the paths of optimal investment and employment plans are investigated using the method of sensitivity analysis we also derive testable hypotheses about the effects of variations in the market wage rate and the interest rate on the optimal investment and employment plans of the firm

dynamic efficiency estimation the shadow cost approach is developed in the context of the dynamic duality model of intertemporal decision making to formulate theoretical and econometric models of dynamic efficiency the dynamic efficiency model is applied to a panel of 72 u s major investor owned electric utilities using fossil fuel fired steam electric power generation over the period 1986 1999 the major results show that most electric utilities underutilized fuel relative to the aggregated labor and the maintenance input and overutilized capital in production states adopting a deregulation plan improve the performance of utilities in terms of the technical efficiency of variable inputs

disaggregated capital stock estimation for austria methods concepts and results based on a survey of the appropriate literature and on separate investigations concerning distributions of asset lives and depreciation patterns of vehicles gross and net capital stocks as well as depreciation at constant prices and at replacement cost have been estimated for austria using the perpetual inventory method the problem of the limited length of investment time series has tried to be overcome by assigning a fixed age to each initial stock the level of disaggregation for the calculations is onace 2 digit2 and this has been further broken down to the categories buildings machinery and equipment and vehicles all available a priori knowledge and data have been incorporated all estimates of capital stocks and depreciation based on industry level investment data are subject to uncertainty due to the lack of information at the asset type level in order to give a quantitative assessment of this uncertainty for the public as well as for the private enterprise sector several scenarios have been

are the current account imbalances between emu countries sustainable evidence from parametric and non parametric tests summary using parametric and non parametric estimation techniques we analyze the sustainability of the recently growing current account imbalances in the euro area and test whether the european monetary union has aggravated these imbalances two alternative criteria for the assessment of external debt sustainability are considered one based on the transversality condition of intertemporal optimization and the other based on the stationarity properties of the stochastic process of the debt gdp ratio econometric sustainability tests are performed using the pooled mean group estimator and panel unit root tests respectively variants of both test procedures with varying coefficients using penalized splines estimation are applied we find empirical evidence suggesting that the introduction of the euro is associated with a regime shift from sustainability to unsustainability of external debt accumulation for the euro area copyright 2012 john wiley sons ltd

growth accounting when technical change is embodied in capital this paper revisits the hypothesis that technical change is embodied in capital it extends old results to make them more relevant to the contemporary debates about the adjustment of investment goods for quality change and about the role of embodied technical change as a source of economic growth it is shown that the failure to adjust capital for quality change has the effect of suppressing the quality effects into the conventional total factor productivity residual and it is found that approximately 20 percent of the residual growth of quality adjusted output could be attributed to embodied technical change copyright 1992 by american economic association

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

lechatelier effects for the competitive firm under price uncertainty lechatelier effects confirm the intuition that constrained decisions are not only suboptimal but also restrained in the sense of being less elastic samuelson 1947 introduced this idea into economics and showed that it blends neatly with economic models of decision making under certainty being particularly well suited to the competitive firm as emphasized by silberberg 1971 linearity of the objective function combines with convexity in the constraint imposed by the production technology to yield envelope results at the first order and lechatelier effects at the second as powerful consequences of the maximization hypothesis the envelope results of primary interest in producer theory shephard s lemma for cost functions and hotelling s lemma for profit functions are equality relations reflecting the firstorder stationarity of an optimum lechatelier effects in contrast are inequality relations reflecting the restrained nature of short run responses compared with long run less constrained responses thus the quantities of labor demanded and output supplied are more elastic with respect to wage rate and output price changes in the long run than in the short run these lechatelier predictions pertain to a firm that has fully adjusted to an exogenous set of factor and output prices and thus apply only in the neighborhood of a long run equilibrium configuration for the firm however they apply equally well whether capital and labor are substitute or complementary factors of production milgrom and roberts 1996 have established a global lechatelier principle under the assumption that capital and labor are always substitutes or always complements in production a stipulation that is necessarily true for the infinitesimal changes contemplated in the local lechatelier predictions when the firm makes decisions while facing uncertainty about output price risk preferences influence behavior if the uncertainty cannot be fully diversified through futures contracts or the sale of ownership shares as in the case of closely held family businesses such as some of those

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

on the limitations of government borrowing a framework for empiricaltesting this paper seeks to distinguish empirically between two views on the limitations of government borrowing according to one view nothing precludes the government from running a permanent budget deficit paying interest due on the growing debt load simply by issuing new debt an alternative perspective holds that creditors would be unwilling to purchase government debt unless the government made a credible commitment to balance its budget in present value terms we show that distinguishing between these possibilities is mathematically equivalent to testing whether a continuing currency inflation might be fueled by speculation alone or is instead driven solely by economic fundamentals empirical tests which have been developed for this economic question lead us to conclude that postwar u s deficits are largely consistent with the proposition that the government budget must be balanced in present value terms this abstract was borrowed from another version of this item

rates of return on capital across the world are they converging this article estimates levels and identifies trends in the profitability of capital in a broad sample of developed developing and post communist transition economies making up over 80 of global output the underlying distributional and efficiency determinants of profitability are considered in the marxian analytical framework for the period of 1995 2007 leading to the great recession our estimates indicate a trend towards convergence of national profit rates largely driven by the convergence of profitability in developing and transition economies during this period the level of profit rates in all groups of countries experienced growth with the global capital weighted rate of profit increasing by approximately 50 the main contributor to this growth in all groups of countries was the increase in average productivity of capital measured by output capital ratio in developed and transition economies the increase in profit shares of national income and the decline in the relative price of capital goods also contributed to profitability growth in the same period for developing countries profit shares and relative prices were relatively stable

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

dynamic and static behaviour with respect to energy use and investment of dutch greenhouse firms dutch greenhouse horticulture firms are energy intensive and major emitters of greenhouse gases this paper develops a theoretically consistent model that is able to describe the greenhouse firms behaviour regarding energy use and investments in energy technology the behaviour of the firm is modelled using a combination of a dynamic cost function and a static profit function framework the optimal quantity of energy is derived from the link between these two functions the model is applied to a panel of 97 dutch greenhouse firms over the period 2001 2008 the results show that most dutch greenhouse firms shift from being net electricity users to net electricity producers in the long term investing in energy capital contributes to reducing net energy use however it increases the quantity of carbon dioxide emissions due to an increase in electricity production a 1 increase of the price of gas reduces carbon dioxide emissions by 1 6

primal and dual dynamic luenberger productivity indicators abstract this paper develops primal and dual versions of the dynamic luenberger productivity growth measures that are based on the dynamic directional distance function and intertemporal cost minimization respectively the empirical application focuses on panel data of dutch dairy farms over the period 1995 2005 primal dynamic luenberger productivity growth averages 1 5 percent annually in the period under investigation with technical change being the main driver of annual change dual dynamic luenberger productivity growth is 0 1 percent in the same period improvements in technical inefficiency and technical change are partly counteracted by deteriorations of allocative inefficiency with large dairy farms presenting a slightly higher productivity growth than small dairy farms

how large is the economy wide rebound effect abstract the size of the economy wide rebound effect is crucial for estimating the contribution that energy efficiency improvements can make to reducing greenhouse gas emissions and for understanding the drivers of energy use economy wide rebound from an energy efficiency improvement includes changes in the use of energy to produce complementary and substitute goods or inputs and other flow on effects that affect energy use across the economy as well as the direct rebound due to energy users using more of an energy service that has become less costly as result of improved energy efficiency jevons first argued in 1865 that improvements in energy efficiency increase total energy use and in recent decades researchers have argued for and against this backfire hypothesis theory provides some guidance on the factors affecting rebound but does not impose much constraint on the range of possible responses historical evidence suggests that the improved energy efficiency of recent technology has not reduced energy use because consumption has shifted to more energy intensive goods and services simulations and econometric research have produced mixed results some recent general equilibrium studies find large rebound around 100 but more research is needed to confirm or refute these findings

technological progress and optimal supply price abstract this article presents an analysis of the firm s optimal product price decision as a joint process with optimal production planning the production decision is formulated as a dynamic optimization problem over an infinite horizon under conditions of profit maximization and rational expectation given a set of market and technical progress information the problem is solved to obtain the time paths of shadow prices of capital and labor services these shadow prices of factors are combined to construct the time path of the optimal supply price sensitivity analysis are conducted on the optimal supply price to isolate the variational effects of technical progress and labor turnover rate the results are stated as propositions

technical change and full employment the result of a major research project which assesses the effects of technical change on employment levels the structure of employment and the nature of work itself this study concludes that social changes must accompany and even precede technical innovation

a flexible dynamic model of multiproduct technology for the west german economy this paper tests symmetry and negativity of the slutsky matrix for a system of demand functions derived from an aggregate model of multi product technology within a flexible dynamic framework the model considers three inputs and three outputs including imports and exports of intermediate goods we derive a static demand model from a trans log cost function and specify the data generation process by a stationary arx 1 1 model results based on west german quarterly data indicate that the integrability conditions are not rejected when imposed on the arx 1 1 model whereas they are rejected for all the less general dynamic models considered

capital accumulation and resource depletion a hartwick rule counterfactual how rich would resource abundant countries be if they had actually followed the hartwick rule invest resource rents in other assets over the past 30 years the authors use time series data on investments and rents on exhaustible resource extraction for 70 countries to answer this question the results are striking gabon trinidad and tobago and venezuela would all be as wealthy as the republic of korea while nigeria would be five times as well off as it is currently the authors also derive a more general rule for sustainability maintain positive constant genuine investment and use this to draw further empirical results

technology asymmetries group algebra and multiplant cost minimization for a homogeneous good this article studies firm level production activities when the firm controls a plural number of plants through careful construction of cost function technology asymmetries we inquire into the ordinal structure of the production vector for multiplant cost minimizers when schur convexity of a reference pseudo cost technology is the principal functional assumption then ordinal concepts of technical asymmetries map into rank order on the equilibrium production vector under a more generalized characterization of the technical asymmetries a multiplant firm encounters group theory is used to map a cardinal concept of asymmetries into cardinal bounds on the optimum allocation

costs of adjustment the aggregation problem and investment this paper looks at the empirical consequences of inappropriately using a representative firm to mimic the aggregate investment decisions of a group of heterogeneous firms faced with costs of adjusting capital inputs improper aggregation generates a bias with two important consequences 1 an apparent insensitivity of the aggregate capital stock to the user cost of capital and 2 predicted responses of the capital stock to shocks that are considerably slower than observed both of these consequences are features of available investment equations copyright 1992 by mit press

stylized facts of investment in canada although fixed business investment accounts for a large and growing share of uptput in canada surprisingly little is known about it some stylized facts of investment in canada are set forth and the ability of some of the standard price variables to explain canadian data are briefly reviewed the behavior of aggregate investment and its components are analysed in both the time domain and in the frequency domain it is founjd that there is only a weak relationship between expenditure on non residential structures and on machinery and equipment and also that at the industry level there has been a great deal of variation of patterns in investment by industry in one example investment in the commercial services indusry is found to lead investment in the manufacturing sector it is also noted that investment and output in the united states lead investment and output in canada with the lead in investment being less strong thatn the lead in output in keeping with the patterns observed in expirical models

the multivariate flexible accelerator model its empirical restrictions and an application to u s manufacturing this paper derives an exhaustive set of restrictions implied by the multistock flexible accelerator specification of the adjustment cost model for the firm the flexible accelerator specification of the demand for capital and labor is estimated using u s manufacturing annual data for the 1947 1976 period the consistency of the data with the model is examined by testing the validity of the derived restrictions finally the conditions which permit aggregation over firms are determined and tested empirically the flexible accelerator specification has been popular in the empirical literature on interrelated investment and employment decisions see nadiri and rosen 38 coen and hickman 10 and schramm 40 more recent examples include sargent 39 berndt fuss and wavermann 4 berndt and morrison 6 and meese 34 under suitable assumptions the specification may be rationalized by the adjustment cost model of the firm eisner and strotz 13 lucas 30 mortensen 35 extends the work of lucas and derives some empirically testable restrictions of the accelerator specification that are implied by the adjustment cost framework the broad objective of this paper is to provide a more rigorous and comprehensive test of the adjustment cost model than is presently found in the literature this objective is achieved in three stages first we offer an alternative derivation of the mortensen restrictions and more importantly we prove theorem 1 that his restrictions are exhaustive i e we establish an integrability result for the flexible accelerator adjustment cost model second the flexible accelerator specification of the demand for capital and labor is estimated using total u s manufacturing annual data for the 1947 76 period it is assumed that firms minimize expected production costs subject to a technology which implies that capital and labor stocks are costly to adjust while a third factor materials is freely adjustable the consistency of the data with the adjustmentcost framework is examined by testing for the validity of the derived restrictions further we test the validity of some separability restrictions on the adjustmentcost technology that to varying degrees are imposed a priori in all of the cited empirical studies finally we provide a complete characterization of the individual firm technologies which justify the common assumption of the existence of a representative firm this problem of aggregation over firms which has been

pass through in a concentrated industry empirical evidence and regulatory implications we estimate pass through with thirty years of data from a concentrated industry the empirical model accounts for oligopoly interactions yet facilitates estimation with aggregate price data robust statistical evidence supports that industry wide cost changes are more than completely transmitted downstream and that this industry pass through is largely unaected by competitive conditions the industry in question portland cement is a major focus of environmental and antitrust regulators we use our pass through estimates to i evaluate the welfare consequences of marketbased co2 regulation ii predict the magnitude and location of price eects due to a merger under review by antitrust authorities and iii corroborate the simulation based analysis of the epa regarding its impending regulation of local pollutants

output response to prices and public investment in agriculture indonesian food crops abstract this paper analyzes dynamic food crop supply response in indonesia the effects of technology prices and investments on output growth for rice corn soybean and cassava are examined the analysis generates crop wise area yield and input demand parameters suitable for the evaluation of price and investment policies and shows the large impact of public investment in agricultural research extension and irrigation on long run output growth in indonesia elimination of the fertilizer subsidy and reinvestment of the resulting fiscal savings in research extension and irrigation would produce large benefits

are stationarity and cointegration restrictions really necessary for the intertemporal budget constraint abstract time series related to fiscal and external deficits are commonly subjected to stationarity and cointegration tests to assess if the deficits are sustainable such tests are incapable of rejecting sustainability the intertemporal budget constraint proves to be satisfied if either the debt series or the revenue and with interest spending series are integrated of arbitrarily high order i e stationary after differencing arbitrarily often revenues and spending do not have to be cointegrated rejections of low order difference stationarity and of cointegration are thus consistent with the intertemporal budget constraint error correction type policy reaction functions are suggested as more promising for understanding deficit problems

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

the short and long run comparative statics of uncertainty abstract if a two input stochastic reward function is supermodular then a first degree stochastic shift increases both inputs and the more variable factor is more responsive in the long run these results hold for second degree dominance under additional curvature conditions

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

supermodularity and complementarity in economics an elementary survey the literature on supermodular optimization and games is surveyed from the perspective of potential users in economics this methodology provides a new approach for comparative statics based only on critical assumptions and allows a general analysis of games with strategic complementarities the results are presented in a simplified yet rigourous manner without reference to lattice theory for the special case of one dimensional parameter and actions sets with the emphasis being on wide accessibility detailed applications are presented for well known models of consumer behavior monopoly pass through bertrand and cournot competition strategic r d search and matching wherever appropriate useful tricks for applications and comparative comments are inserted

lechatelier samuelson principle in games and pass through of shocks abstract the lechatelier samuelson principle states that as a reaction to a shock an agent s short run adjustment of an affected action is smaller than its long run adjustment when the agent can also adjust other related actions we extend the principle to strategic environments where the long run adjustment also accounts for other players adjusting their strategies we show that the principle holds for supermodular games strategic complements satisfying monotone comparative statics and provide sufficient conditions for the principle to hold in games of strategic substitutes heterogeneity we discuss the principle s implications for cost pass through of multiproduct firms

adjustment cost and supply response in a fishery a dynamic revenue function in industries where firms can adjust product mix in response to price changes the process can be delayed by adjustment costs an example is fishermen who change fishing grounds to target different species if adjustment costs are sufficiently large this may hamper the fishermen s response so that regulatory tools that are not efficient in the long run are useful in the short run moreover adjustment costs can influence the choice of species targeted in this paper dynamic supply equations are specified using a revenue function approach different hypotheses about the dynamics of the supply equations are tested for norwegian trawlers

the lechatelier principle in a dea model abstract this paper aims to relate the lechatelier principle first introduced into economics by samuelson 1947 with the dea approach through two propositions these propositions allow for bridging the principle over a dea model with and without the presence of non discretionary inputs and enable one to make comparisons for the various efficiency measures under different conditions the quasi fixity of some inputs hinders a firm s capacity from instantly and freely adjusting its input combination in order to minimize its production costs the assumption that all inputs are discretionary tends to exaggerate managers ability to dispense resources and renders invalid information on the adjustment of the current input mix

financial stress sovereign debt and economic activity in industrialized countries evidence from dynamic threshold regressions we analyze how the impact of a change in the sovereign debt to gdp ratio on economic growth depends on the level of debt the stress level on the financial market and the membership in a monetary union a dynamic growth model is put forward demonstrating that debt affects macroeconomic activity in a non linear manner due to amplifications from the financial sector employing dynamic country specific and dynamic panel threshold regression methods we study the non linear relation between the growth rate and the debt to gdp ratio using quarterly data for sixteen industrialized countries for the period 1981q1 2013q2 we find that the debt to gdp ratio has impaired economic growth primarily during times of high financial stress and only for countries of the european monetary union and not for the stand alone countries in our sample a high debt to gdp ratio by itself does not seem to necessarily negatively affect growth if financial markets are calm

intertemporal price indices for the firm abstract a notion of intertemporal price aggregation is analysed within the adjustment cost model of the firm and is shown to be feasible precisely for those technologies which imply an accelerator adjustment rule a unique feature of the common quadratic production function specification is established the analysis is shown to be relevant to the possibility of decentralization within the firm to functional form specification for dynamic demand functions and to comparative dynamics analysis

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

sufficient decisions in multi sided and multiproduct markets we show that in many models where firms make multiple decisions analysis can be made more tractable by re formulating the model into one in which each firm makes a single choice which we call a sufficient decision the transformation allows application of standard techniques in these settings including pass through for tax incidence and upward pricing pressure for merger analysis the transformation works because the assumption of profit maximization links the firms decisions together examples include models of monopoly and oligopoly in two sided markets where a natural sufficient decision may be the number of transactions that the firm facilitates and multiproduct markets

the existence of input and output aggregates in aggregate production functions in this paper we make two contributions to the literature on aggregating inputs and outputs in economy production functions first we present necessary and sufficient conditions for aggregating efficiently allocated goods under general assumptions on the technology second we present a general theorem on the conditions for the existence of aggregates of both efficiently allocated goods and arbitrarily allocated goods we use this theorem to elucidate the role of efficiency in determining the existence of aggregates

adjustment costs and factor demands in canadian manufacturing industries the question of whether regional disparities in canada could arise as a result of nonconstant returns to scale and non identical production functions is examined this is accomplished by estimating and comparing the decision rules for factor demands across canadian regions the decision rules are based on a flexible and dynamic production technology which allows for the presence of internal adjustment costs do not impose constant returns to scale or require hours and workers to have the same output elasticities the model is estimated for four separate canadian regions ontario quebec the western and eastern provinces on annual data ranging from 1965 to 1985