Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)
Magne Krogstad Asphjell
Sequentiality versus Simultaneity: Interrelated Factor Demand.
(), Wilko Letterie
(), Řivind Anti Nilsen
() and Gerard A. Pfann
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.; (follow links to similar papers)
JEL-Codes: D92; E22; E24; J23; L60; (follow links to similar papers)
47 pages, December 2, 2010
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