The Intertemporal Dimension of Neoclassical Production Theory
AbstractThe aim of this survey paper is to provide a guide to the literature on optimal dynamic factor demands to the non-specialist reader interested in applied work. We start with the distinction between variable and quasi-fixed factors of production and use these to characterize the firm's temporary equilibrium. We then review the optimal intertemporal behaviour of the firm, using the notion of adjustment costs as a means to solve the firm's optimization problem. This process gives rise to a system of interrelated dynamic factor demands in a flexible accelerator format. Theoretical difficulties and empirical limitations of this model are discussed. This fact leads us to review the theory of intertemporal duality. We next analyze the issue of expectations in this class of dynamic models. A section reviewing the empirical work on dynamic factor demands follows, after which we offer some concluding remarks. Copyright 1996 by Blackwell Publishers Ltd
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Economic Surveys.
Volume (Year): 10 (1996)
Issue (Month): 4 (December)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0950-0804
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- Caputo, Michael R., 2003. "The comparative dynamics of closed-loop controls for discounted infinite horizon optimal control problems," Journal of Economic Dynamics and Control, Elsevier, vol. 27(8), pages 1335-1365, June.
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- Lin, Ni & Shumway, C. Richard, 2000. "Asset Fixity In U.S. Agriculture: Robustness To Functional Form," Ag Econ Series 12967, Washington State University, School of Economic Sciences.
- Matteo Manera & Bruno Sitzia, 2005. "Empirical factor demands and flexible functional forms: a bayesian approach," Economic Systems Research, Taylor & Francis Journals, vol. 17(1), pages 57-75.
- Thomsen, Thomas, 2000. "Short cuts to dynamic factor demand modelling," Journal of Econometrics, Elsevier, vol. 97(1), pages 1-23, July.
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