Sequentiality versus Simultaneity: Interrelated Factor Demand

Magne Krogstad Asphjell (), Wilko Letterie, Øivind Nilsen and Gerard Pfann
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Magne Krogstad Asphjell: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway

No 29/2010, Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics

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

Keywords: Factor Demand; Labour; Capital; Interrelation; Nonconvex Adjustment Costs. (search for similar items in EconPapers)
JEL-codes: D92 E22 E24 J23 L60 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2010-12-02
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Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Sequentiality Versus Simultaneity: Interrelated Factor Demand (2014)
Working Paper: Sequentiality versus Simultaneity: Interrelated Factor Demand (2010)
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