Capital Utilisation and Retirement
AbstractThis empirical analysis aims at assessing the effect of the economic climate and the intensity of capital utilisation on companies’ capital retirement behaviour. It is conducted using individual company data, as well as original data on the degree of utilisation of production factors. The sample includes 6,998 observations over the period 1996-2008. This database is, to our knowledge, unique for the empirical analysis of the intensity of capital utilisation on firms’ capital retirement behaviour. We adjust for endogeneity biases by means of instrumental variables. The main results obtained from the estimation of capital retirement models may be summarised as follows: i) The retirement rate decreases with the variations in cyclical pressures measured by the changes in output and the workweek of capital; this relation corresponds to a countercyclical decelerator effect on capital retirement; ii) The capital retirement rate increases with the structural intensity of capital utilisation; this effect, which corresponds to a wear and tear one, is nevertheless small compared to the decelerator one; iii) The profit rate does not have a significant impact on the retirement rate. Compared with the existing literature, here mainly Mairesse and Dormont (1985), the contribution of these results is to show, through the use of unique survey data, that the effect of the intensity of capital utilisation on capital retirement is structurally positive, via a wear and tear effect, and cyclically negative, via a decelerator effect which completes that already taken into account via the effect of changes in value added.
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Bibliographic InfoPaper provided by Banque de France in its series Working papers with number 343.
Length: 23 pages
Date of creation: 2011
Date of revision:
Capital; Capital measure; Capital retirement; Capital utilisation.;
Other versions of this item:
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
This paper has been announced in the following NEP Reports:
- NEP-AGE-2011-09-22 (Economics of Ageing)
- NEP-ALL-2011-09-22 (All new papers)
- NEP-LAB-2011-09-22 (Labour Economics)
- NEP-MAC-2011-09-22 (Macroeconomics)
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