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Capital Utilisation and Retirement

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  • Antoine Bonleu

    ()
    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)

  • Gilbert Cette

    ()
    (Banque de France - Banque de France)

  • Guillaume Horny

    ()
    (Centre de recherche de la Banque de France - Banque de France)

Abstract

This 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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Paper provided by HAL in its series Working Papers with number halshs-00635477.

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Date of creation: 25 Oct 2011
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Handle: RePEc:hal:wpaper:halshs-00635477

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Keywords: Capital; Capital measure; Capital retirement; Capital utilisation;

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  1. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
  2. Cragg, John G. & Donald, Stephen G., 1993. "Testing Identifiability and Specification in Instrumental Variable Models," Econometric Theory, Cambridge University Press, vol. 9(02), pages 222-240, April.
  3. Jorgenson, D.W., 1994. "Empirical Studies of Depriciation," Harvard Institute of Economic Research Working Papers 1704, Harvard - Institute of Economic Research.
  4. Jeffrey M. Wooldridge, 2001. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262232197, December.
  5. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  6. Jacques Mairesse & Brigitte Dormont, 1985. "Labor and Investment Demand at the Firm Level: A Comparison of French, German and U.S. Manufacturing, 1970-79," NBER Working Papers 1554, National Bureau of Economic Research, Inc.
  7. Jinyong Hahn & Jerry Hausman & Guido Kuersteiner, 2004. "Estimation with weak instruments: Accuracy of higher-order bias and MSE approximations," Econometrics Journal, Royal Economic Society, vol. 7(1), pages 272-306, 06.
  8. Burnside, Craig & Eichenbaum, Martin, 1996. "Factor-Hoarding and the Propagation of Business-Cycle Shocks," American Economic Review, American Economic Association, vol. 86(5), pages 1154-74, December.
  9. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
  10. Bitros, George C. & Hritonenko, Natali & Yatsenko, Yuri, 2007. "Investment, replacement and scrapping in a vintage capital model with embodied technological change," MPRA Paper 3619, University Library of Munich, Germany.
  11. Marcelo Veracierto, 1998. "Plant level irreversible investment and equilibrium business cycles," Working Paper Series WP-98-1, Federal Reserve Bank of Chicago.
  12. Alfonso Flores-Lagunes, 2007. "Finite sample evidence of IV estimators under weak instruments," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(3), pages 677-694.
  13. Bond, Stephen & Van Reenen, John, 2007. "Microeconometric Models of Investment and Employment," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 65 Elsevier.
  14. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-17, June.
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Cited by:
  1. Antonio Garofalo & Concetto Paolo Vinci, 2000. "Employment, capital operating time and efficiency wages hypothesis: is there any room for worksharing," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 168, pages 397-442.
  2. Michalis Nikiforos, 2012. "On the Utilization Controversy: A Theoretical and Empirical Discussion of the Kaleckian Model of Growth and Distribution," Economics Working Paper Archive wp_739, Levy Economics Institute.
  3. Antonio Garofalo & R. Plasman & Concetto Paolo Vinci, 2000. "Reducing Working Time In An Efficiency Wage Economy With A Dual Labour Market," Working Papers 7_2000, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.

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