Do Financial Factors Affect the Capital-Labour Ratio? Evidence form UK FIrm-Level Data

Marina-Eliza Spaliara ()
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Marina-Eliza Spaliara: Dept of Economics, Loughborough University

Discussion Paper Series from Department of Economics, Loughborough University

Abstract: This paper investigates the nexus between financial factors and the capital-labour ratio using a rich firm-level data set. It is common in the literature to examine the impact of financial constraints on hiring and firing decisions separately from their impact on decisions related to investment in physical capital. We argue that as long as firms use both inputs in production and there is some substitutability between them, the two decisions need to be jointly analyzed. When we differentiate across firms that are more or less financially constrained, we find that the former group exhibits higher sensitivi¬ties of the capital-labour ratio to firm-specific characteristics, compared to the latter.

Keywords: Financial constraints; Firm-specific characteristics; Capital-Labour ratio. (search for similar items in EconPapers)
JEL-codes: D92 E22 E44 (search for similar items in EconPapers)
Date: 2008-04, Revised 2008-04
New Economics Papers: this item is included in nep-bec and nep-mac
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Related works:
Journal Article: Do financial factors affect the capital-labour ratio? Evidence from UK firm-level data (2009)
Working Paper: Do Financial Factors Affect The Capital-Labour Ratio: Evidence From UK Firm-Level Data (2009)
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