A Dynamic Factor Demand Model for the Swedish Pulp Industry, 1998

Tommy Lundgren () and Magnus Sjöström ()
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Magnus Sjöström: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

No 479, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: In this paper we specify and estimate a dynamic factor demand model for the Swedish pulp industry. Firms are assumed to have rational expectations and costs of adjustment will arise when the capital stock is altered. The estimates are based on plant level panel data for the period 1972-1990. We find weak evidence of the presence of adjustment costs. All the estimated own price elasticities are negative and the empirical cost function have all the desired properties from theory. The result suggest that user cost of capital is a significant determinant of pulp industry investment, while output level is not. We also find that pulp industry investment is insensitive to variations in the price of electricity.

Keywords: factor demand; dynamic optimization; panel data; bootstrap (search for similar items in EconPapers)
JEL-codes: C33 C61 D21 (search for similar items in EconPapers)
Pages: 20 pages
Date: 1998-10-18
New Economics Papers: this item is included in nep-env and nep-tid
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Citations: View citations in EconPapers (6)

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