Input cost, capacity utilization and substitution in the short run
AbstractThis article studies the behavior of input cost shares in an environment where labor is costly to adjust, materials can be adjusted at no cost and capital is fixed. A model relating cost shares with relative prices and adjustment costs is proposed, allowing joint estimation of the elasticity of substitution and the adjustment cost function, which is an unknown function of the utilization capacity. Based on a panel of more than 700 manufacturing firms, we find evidence of strong input share variations according to the degree of capacity utilization. The estimated shapes of adjustment costs curves of labor are in agreement with our theoretical model, and we obtain sensible elasticities of substitution estimates. Based on such estimates, we find evidence of a negative (positive) bias in downturns (recoveries) in conventional productivity growth measures.
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Input costs; Capacity utilization; Substitution in the short run; Partially linear model; Nonparametric regression;
Other versions of this item:
- Miguel A. Delgado & Jordi Jaumandreu & Ana Martín Marcos, 1999. "Input cost, capacity utilization and substitution in the short run," Spanish Economic Review, Springer, vol. 1(3), pages 239-262.
- Delgado, Miguel A. & Jaumandreu, Jordi & Martín Marcos, Ana, . "Input cost, capacity utilization and substitution in the short run," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/2444, Universidad Carlos III de Madrid.
- Delgado, Miguel A. & Jaumandreu, Jordi & Martín Marcos, Ana, . "Input cost, capacity utilization and substitution in the short run," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/5284, Universidad Carlos III de Madrid.
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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- Estrada Vaquero, Isabel & Mart¡n Cruz, Natalia & Fuente Herrero, Gabriel de la, 2008. "Technological Strategic Alliances: Formation under the Real Options Approach," Working Papers "New Trends on Business Administration". Documentos de Trabajo "Nuevas Tendencias en DirecciÃ³n de Empresas". 2008-04, Interuniversity Research Master and Doctorate Program (with a quality mention of ANECA) on "Business Economics", Universities of Valladolid, Burgos, Salamanca and León (Spain). Until 2008, Interunive.
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Open Access publications from Universidad Carlos III de Madrid
info:hdl:10016/5263, Universidad Carlos III de Madrid.
- Garcia, Angel & Jaumandreu, Jordi & Rodriguez, Cesar, 2004. "Innovation and jobs: evidence from manufacturing firms," MPRA Paper 1204, University Library of Munich, Germany.
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