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Do Financial Factors Affect the Capital-Labour Ratio? Evidence form UK FIrm-Level Data

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Author Info
Marina-Eliza Spaliara () (Dept of Economics, Loughborough University)

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Abstract

This paper investigates the nexus between financial factors and the capital-labour ratio using a rich firm-level data set. It is common in the literature to examine the impact of financial constraints on hiring and firing decisions separately from their impact on decisions related to investment in physical capital. We argue that as long as firms use both inputs in production and there is some substitutability between them, the two decisions need to be jointly analyzed. When we differentiate across firms that are more or less financially constrained, we find that the former group exhibits higher sensitivi¬ties of the capital-labour ratio to firm-specific characteristics, compared to the latter.

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File URL: http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/KL_Ratio.pdf
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Publisher Info
Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2008-02.

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Date of creation: Apr 2008
Date of revision: Apr 2008
Handle: RePEc:lbo:lbowps:2008-02

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Related research
Keywords: Financial constraints; Firm-specific characteristics; Capital-Labour ratio.;

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Find related papers by JEL classification:
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Investment, or Financing
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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This page was last updated on 2009-11-26.

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