Umeå Economic Studies, Department of Economics, Umeå University
No 479:
A Dynamic Factor Demand Model for the Swedish Pulp Industry, 1998
Tommy Lundgren ()
and Magnus Sjöström ()
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; (follow links to similar papers)
JEL-Codes: C33; C61; D21; (follow links to similar papers)
20 pages, October 18, 1998
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