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A Dynamic Factor Demand Model for the Swedish Pulp Industry, 1998

Author

Listed:
  • Lundgren, Tommy

    (Department of Forest Economics)

  • Sjöström, Magnus

    (Department of Economics, Umeå University)

Abstract

In this paper we specify and estimate a dynamic factor demand model for the Swedish pulp industry. Firms are assumed to have rational expectations and costs of adjustment will arise when the capital stock is altered. The estimates are based on plant level panel data for the period 1972-1990. We find weak evidence of the presence of adjustment costs. All the estimated own price elasticities are negative and the empirical cost function have all the desired properties from theory. The result suggest that user cost of capital is a significant determinant of pulp industry investment, while output level is not. We also find that pulp industry investment is insensitive to variations in the price of electricity.

Suggested Citation

  • Lundgren, Tommy & Sjöström, Magnus, 1998. "A Dynamic Factor Demand Model for the Swedish Pulp Industry, 1998," Umeå Economic Studies 479, Umeå University, Department of Economics.
  • Handle: RePEc:hhs:umnees:0479
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    Citations

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    Cited by:

    1. Lundmark, Robert & Olsson, Anna, 2015. "Factor substitution and procurement competition for forest resources in Sweden," International Journal of Production Economics, Elsevier, vol. 169(C), pages 99-109.
    2. Ankarhem, Mattias, 2005. "Effects of Increased Demand for Biofuels: A Dynamic Model of the Swedish Forest Sector," Umeå Economic Studies 658, Umeå University, Department of Economics.
    3. Lundgren, Tommy & Sjostrom, Magnus, 2001. "A flexible specification of adjustment costs in dynamic factor demand models," Economics Letters, Elsevier, vol. 72(2), pages 145-150, August.
    4. Bengt Kristrom & Tommy Lundgren, 2003. "Abatement investments and green goodwill," Applied Economics, Taylor & Francis Journals, vol. 35(18), pages 1915-1921.
    5. Ankarhem, Mattias, 2005. "Bioenergy, Pollution, and Economic Growth," Umeå Economic Studies 661, Umeå University, Department of Economics.
    6. Hammar, Henrik & Lundgren, Tommy & Sjöström, Magnus, 2006. "The significance of transport costs in the Swedish forest industry," Working Papers 97, National Institute of Economic Research.

    More about this item

    Keywords

    factor demand; dynamic optimization; panel data; bootstrap;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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