Sequentiality versus simultaneity: Interrelated factor demand

M.K. Asphjell; W.A. Letterie; O.A. Nilsen; G.A. Pfann

doi:10.1162/REST_a_00411

Sequentiality versus simultaneity: Interrelated factor demand

M.K. Asphjell^*, W.A. Letterie, O.A. Nilsen, G.A. Pfann

^*Corresponding author for this work

Research output: Contribution to journal › Article › Academic › peer-review

Abstract

Firms may adjust capital and labor sequentially or simultaneously. In this paper, we develop a structural model of interrelated factor demand subject to nonconvex adjustment costs and estimated by simulated method of moments. Based on Norwegian manufacturing industry plant-level data, parameter estimates reveal cost advantages for adjusting capital and making net changes in labor simultaneously. Factor demand models with fully specified interrelated adjustment costs structures perform best to describe the dynamic panel data.

Original language	English
Pages (from-to)	986-998
Journal	Review of Economics and Statistics
Volume	96
Issue number	5
DOIs	https://doi.org/10.1162/REST_a_00411
Publication status	Published - 1 Dec 2014

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title = "Sequentiality versus simultaneity: Interrelated factor demand",

abstract = "Firms may adjust capital and labor sequentially or simultaneously. In this paper, we develop a structural model of interrelated factor demand subject to nonconvex adjustment costs and estimated by simulated method of moments. Based on Norwegian manufacturing industry plant-level data, parameter estimates reveal cost advantages for adjusting capital and making net changes in labor simultaneously. Factor demand models with fully specified interrelated adjustment costs structures perform best to describe the dynamic panel data.",

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Sequentiality versus simultaneity: Interrelated factor demand

Abstract

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