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Capital Utilization and Capital Accumulation: Theory and Evidence

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Author Info
Matthew D. Shapiro

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Abstract

A firm may acquire additional caoital input by purchasing new capital or by increasing the utilization of its current capital. The margin between capital accumulation and capital utilization is studied in a model of dynamic factor demand where the firm chooses capital, labor, and their rates of utilization. A direct measure of capital utilization --the workweek of capital--is incorporated into the theory and estimates. The estimates imply that capital stock is costly to adjust while the work week of capital is essentially costless to adjust. The estimated response of the capital stock to changes in its price and in the required rate of return is more rapid than found in other estimates.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1900.

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Date of creation: May 1987
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Publication status: published as Shapiro, Matthew D. "Capital Utilization and Capital Accumulation: Theoryand Evidence," Journal of Applied Econometrics, Vol. 1, No. 3, (1986), pp. 211-234.
Handle: RePEc:nbr:nberwo:1900

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Chow, Gregory C & Lin, An-loh, 1971. "Best Linear Unbiased Interpolation, Distribution, and Extrapolation of Time Series by Related Series," The Review of Economics and Statistics, MIT Press, vol. 53(4), pages 372-75, November. [Downloadable!] (restricted)
  2. Bernanke, Ben S, 1983. "The Determinants of Investment: Another Look," American Economic Review, American Economic Association, vol. 73(2), pages 71-75, May. [Downloadable!] (restricted)
  3. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July. [Downloadable!] (restricted)
  4. Feldstein, Martin S & Foot, David K, 1971. "The Other Half of Gross Investment: Replacement and Modernization Expenditures," The Review of Economics and Statistics, MIT Press, vol. 53(1), pages 49-58, February. [Downloadable!] (restricted)
  5. Fischer, Stanley, 1980. "Dynamic inconsistency, cooperation and the benevolent dissembling government," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 93-107, May. [Downloadable!] (restricted)
  6. Rotemberg, Julio J, 1984. "Interpreting the Statistical Failures of Some Rational Expectations Macroeconomic Models," American Economic Review, American Economic Association, vol. 74(2), pages 188-93, May.
  7. Andrew B. Abel & Olivier J. Blanchard, 1987. "The Present Value of Profits and Cyclical Movements in Investment," NBER Working Papers 1122, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Lawrence H. Summers, 1981. "Taxation and Corporate Investment: A q-Theory Approach," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1981-1), pages 67-140. [Downloadable!]
  9. Meese, Richard, 1980. "Dynamic factor demand schedules for labor and capital under rational expectations," Journal of Econometrics, Elsevier, vol. 14(1), pages 141-158, September. [Downloadable!] (restricted)
  10. Kennan, John, 1979. "The Estimation of Partial Adjustment Models with Rational Expectations," Econometrica, Econometric Society, vol. 47(6), pages 1441-55, November. [Downloadable!] (restricted)
  11. Sargent, Thomas J, 1978. "Estimation of Dynamic Labor Demand Schedules under Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1009-44, December. [Downloadable!] (restricted)
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  12. Matthew D. Shapiro, 1984. "The Dynamic Demand for Capital and Labor," Cowles Foundation Discussion Papers 735, Cowles Foundation, Yale University. [Downloadable!]
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  13. Peter M. Garber & Robert G. King, 1983. "Deep Structral Excavation? A Critique of Euler Equation Methods," NBER Technical Working Papers 0031, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Winston, Gordon C, 1974. "The Theory of Capital Utilization and Idleness," Journal of Economic Literature, American Economic Association, vol. 12(4), pages 1301-20, December. [Downloadable!] (restricted)
  15. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-11, July. [Downloadable!] (restricted)
  16. Richard Meese, 1980. "Dynamic factor demand schedules for labor and capital under rational expectations," International Finance Discussion Papers 153, Board of Governors of the Federal Reserve System (U.S.).
  17. Nadiri, M Ishaq & Rosen, Sherwin, 1969. "Interrelated Factor Demand Functions," American Economic Review, American Economic Association, vol. 59(4), pages 457-71, Part I Se. [Downloadable!] (restricted)
  18. Hansen, Lars Peter & Singleton, Kenneth J, 1982. "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 50(5), pages 1269-86, September. [Downloadable!] (restricted)
  19. Pindyck, Robert S & Rotemberg, Julio J, 1983. " Dynamic Factor Demands under Rational Expectations," Scandinavian Journal of Economics, Blackwell Publishing, vol. 85(2), pages 223-38.
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Marzio Galeotti & Louis J Maccini & Fabio Schiantarelli, 2002. "Inventories Employment and Hours," Economics Working Paper Archive 473, The Johns Hopkins University,Department of Economics. [Downloadable!]
    Other versions:
  2. George Bitros & Elias Flytzanis, 2004. "Utilization and Maintenance in a Model with Terminal Scrapping," Macroeconomics 0411016, EconWPA. [Downloadable!]
  3. Richard Quandt & Harvey Rosen, 1988. "Endogenous Output in an Aggregate Model of the Labor Market," Working Papers 625, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
  4. repec:fth:prinin:245 is not listed on IDEAS
  5. Susanto Basu & John Fernald, 2000. "Why Is Productivity Procyclical? Why Do We Care?," NBER Working Papers 7940, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Danny Leung, 2004. "The Effect of Adjustment Costs and Organizational Change on Productivity in Canada: Evidence from Aggregate Data," Working Papers 04-1, Bank of Canada. [Downloadable!]
  7. Richard E. Quandt & Harvey S. Rosen, 1989. "Endogenous Output in an Aggregate Model of the Labor Market," NBER Technical Working Papers 0074, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Susanto Basu & John G. Fernald & Matthew D. Shapiro, 2001. "Productivity Growth in the 1990s: Technology, Utilization, or Adjustment?," NBER Working Papers 8359, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. Santanu Chatterjee, 2003. "Capital Utilization, Economic Growth and Convergence," Computing in Economics and Finance 2003 41, Society for Computational Economics. [Downloadable!]
    Other versions:
  10. Roman Sustek, 2005. "Plant-Level Nonconvexities and the Monetary Transmission Mechanism," Working Papers 2005/09, Czech National Bank, Research Department. [Downloadable!]
  11. Austan Goolsbee & David B. Gross, 1997. "Estimating Adjustment Costs with Data on Heterogeneous Capital Goods," NBER Working Papers 6342, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Michele Boldrin & Luigi Montrucchio, 1987. "The Dynamic Investment Behavior of Firms and Industries in Perfect Foresight Competitive Equilibrium Over Time," UCLA Economics Working Papers 457, UCLA Department of Economics. [Downloadable!]
  13. Charles L. Evans & David A. Marshall, 2005. "Fundamental Economic Shocks and The Macroeconomy," Working Papers Central Bank of Chile 351, Central Bank of Chile. [Downloadable!]
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