Dynamic Factor Demands Under Rational Expectations

Robert Pindyck and Julio Rotemberg

No 1015, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper presents a dynamic model of the industrial demands for structures, equipment, and blue- and white-collar labor. Our approach is consistent with producers holding rational expectations and optimizing dynamically in the presence of adjustment costs, yet it permits generality of functional form regarding the technology. We represent the technology by atranslog input requirement function that specifies the amount of blue-collar labor (a flexible factor) the firm must hire to produce a level of output given its quantities of three quasi-fixed factors that are subject to adjustment costs: non-production (white-collar) 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 apply an instrumental variable technique to estimate these equations using aggregate data for U.S. manufacturing. We find that as a fraction of total expenditures, adjustment costs are small in total hut large on the margin,and that they differ considerably across quasi-fixed factors. We also present short- and long-run elasticities of factor demands.

Date: 1982-11
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Pindyck, Robert S. and Julio J. Rotemberg. "Dynamic Factor Demands Under Rational Expectations." The Scandinavian Journal of Economics, July 1983.

Downloads: (external link)
http://www.nber.org/papers/w1015.pdf (application/pdf)

Related works:
Working Paper: Dynamic factor demands under rational expectations (1982)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:1015

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w1015

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().