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Interrelated Factor Demands from Dynamic Cost Functions: An Application to the Non-energy Business Sector of the UK Economy

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  • Allen, Chris
  • Urga, Giovanni

Abstract

In this paper we propose a dynamic cost function which allows us consistently to derive a set of dynamic interrelated factor demand equations in the general error correction form introduced by Anderson and Blundell (1982). This paper expands results recently published in Urga (1996). It shows that the derivation of an effective underlying cost function allows us to identify the full set of parameters of the underlying process. This does not happen in the standard Anderson-Blundell formulation. We report an empirical exercise, used to model the so-called "supply side" of the London Business School large-scale economic model, where we estimate both the set of factor demands and the underlying dynamic cost function for the non-energy business sector of the UK economy. Copyright 1999 by The London School of Economics and Political Science

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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 66 (1999)
Issue (Month): 263 (August)
Pages: 403-13

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Handle: RePEc:bla:econom:v:66:y:1999:i:263:p:403-13

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Cited by:
  1. Lichter, Andreas & Peichl, Andreas & Siegloch, Sebastian, 2014. "The Own-Wage Elasticity of Labor Demand: A Meta-Regression Analysis," IZA Discussion Papers 7958, Institute for the Study of Labor (IZA).
  2. Agnolucci, Paolo, 2009. "The effect of the German and British environmental taxation reforms: A simple assessment," Energy Policy, Elsevier, vol. 37(8), pages 3043-3051, August.
  3. Martin Falk & Bertrand Koebel, 2001. "A dynamic heterogeneous labour demand model for German manufacturing," Applied Economics, Taylor & Francis Journals, vol. 33(3), pages 339-348.
  4. Håvard Hungnes, 2011. "A demand system for input factors when there are technological changes in production," Empirical Economics, Springer, vol. 40(3), pages 581-600, May.
  5. Urga, Giovanni & Walters, Chris, 2003. "Dynamic translog and linear logit models: a factor demand analysis of interfuel substitution in US industrial energy demand," Energy Economics, Elsevier, vol. 25(1), pages 1-21, January.
  6. Truett, Lila J. & Truett, Dale B., 2002. "The demand for imports in Italy: A production analysis," International Review of Economics & Finance, Elsevier, vol. 11(4), pages 393-409.
  7. Skjerpen, Terje, 2005. "The dynamic factor demand model revisited: The identification problem remains," Economics Letters, Elsevier, vol. 89(2), pages 157-166, November.
  8. Everaert, Gerdie & Heylen, Freddy, 2004. "Public capital and long-term labour market performance in Belgium," Journal of Policy Modeling, Elsevier, vol. 26(1), pages 95-112, January.
  9. Terje Skjerpen, 2004. "The dynamic factor model revisited: the identification problem remains," Discussion Papers 369, Research Department of Statistics Norway.
  10. McAdam, Peter & Willman, Alpo, 2004. "Production, supply and factor shares: an application to estimating German long-run supply," Economic Modelling, Elsevier, vol. 21(2), pages 191-215, March.
  11. Tsionas, Efthymios G. & Christopoulos, Dimitris K., 2003. "Cointegration modeling of interrelated factor demands: With an application to labor-import substitution in the European Union," Journal of Macroeconomics, Elsevier, vol. 25(4), pages 509-526, December.
  12. Willman, Alpo, 2002. "Euro area production function and potential output: a supply side system approach," Working Paper Series 0153, European Central Bank.
  13. Mc Quinn, Kieran, 2003. "Dynamic Factor Demands in a Changing Economy: An Irish Application," Research Technical Papers 3/RT/03, Central Bank of Ireland.

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